Brightline Interactive, Inc 10-K for FY2024
Brightline Interactive, Inc. (BTLN)
About this 10-K
Brightline Interactive, Inc filed this 10-K on September 30, 2024, covering the fiscal year ended June 30, 2024 (FY2024).
Headline figures
Fiscal year ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $8.8M
- down 34.7% from $13.48M a year earlier
- Net loss
- $6.39M
- compared with a net loss of $28.56M a year earlier
- Diluted EPS
- -$0.38
- compared with -$2.05 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TABLE OF CONTENTS
THE GLIMPSE GROUP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2024
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K (this “Report”) includes statements of our expectations, intentions, plans, and beliefs that constitute “forward-looking statements” 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”). It is important for an investor to understand that these statements involve risks and uncertainties, some of which are beyond our control. These statements relate to the discussion of our business strategies and our expectations concerning future operations, margins, profitability, liquidity, and capital resources and to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. We sometimes use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “think,” “will,” “would,” or the negative of these words or other similar or comparable terms and phrases, including references to assumptions, in this Report to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties, risks and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by these forward-looking statements.
Such risks, uncertainties and other factors also include those listed in the section titled “Risk Factors” and elsewhere in this Report and our other filings with the Securities and Exchange Commission (“SEC”). When considering these forward-looking statements, you should keep in mind the cautionary statements in this Report. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Report as a result of new information, future events or developments, except as required by applicable laws and regulations.
When used in this Report, the terms the “Company,” “Glimpse Group,” “Glimpse,” “we,” “us,” “ours,” and similar terms refer to The Glimpse Group, Inc.
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PART I
ITEM 1. BUSINESS
History
The Glimpse Group, Inc. was incorporated in June 2016 under the laws of the State of Nevada, and is headquartered in New York, New York.
Company Overview
The Glimpse Group, Inc. (“Glimpse”, the “Company”) is 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, with a development and modeling center in Turkey. 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.
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.
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, Financial Services, Food & Hospitality, Media & Entertainment, Architecture/Engineering/Construction, Corporate Events and Presentations and Social VR support groups and therapy. 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 shifted our businesses focus to providing immersive technology solutions software and services that are primarily driven by Spatial Computing, Cloud and Artificial Intelligence (“AI”), which we refer to as “Spatial Core”. While this transition is still ongoing, we believe that Spatial Core is a key differentiator, growth driver and competitive advantage for us.
The Glimpse Ecosystem
We develop, commercialize and market innovative and proprietary Immersive technology software products, solutions and intellectual property (“IP”). Our ecosystem is comprised of several entities, each targeting different industry segments in a non-competitive, collaborative manner. Our experienced management and dynamic Immersive technology entrepreneurs and employees have deep domain expertise, providing the foundation for value-add-collaborations throughout our ecosystem.
Each of our ecosystem entities share operational, financial and IP infrastructure, facilitating shorter time-to-market, higher quality products, reduced development costs, fewer redundancies, significant go-to-market synergies and, ultimately, a higher potential for success for the Company. We believe that our collaborative ecosystem is unique and necessary, especially given the early nature of the Immersive technology industry. By offering technologies and solutions in various industry segments, we aim to reduce dependency on any single entity, technology or industry segment.
As part of our platform, we provide a centralized corporate structure, which significantly reduces general and administrative costs (financial, operational, legal & IP), streamlines capital allocation and helps in coordinating business strategies. All employees, no matter which entity they are allocated to, are Glimpse employees.
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Additionally, aligned economic incentives encourage cross-company collaboration. Substantially all of our employees own equity in our Company. The leadership team of each entity, in addition to their initial equity ownership in Glimpse, may also have an economic interest that typically takes form of either: (i) a 5-10% economic interest in the total net sale proceeds of the entity upon a divestiture event or (ii) additional Glimpse equity issuances based on revenue milestones achieved by the entity over a period of several years (typically three years). We believe that this ownership mechanism is a strong driver of cross-pollination of ideas and fosters collaboration. While each entity owns its own IP, our parent company currently owns 100% of each entity.
Organizational Chart:
Glimpse Ecosystem Entities
| 1. | Brightline Interactive, LLC (“BLI”): Immersive and interactive experiences, training scenarios, and simulations for both government and commercial customers. |
| 2. | Sector 5 Digital, LLC (“S5D”): Corporate immersive experiences and events. |
| 3. | Glimpse Learning, LLC: Immersive education, training and upskilling. |
| 4. | Foretell Studios, LLC (d/b/a Foretell Reality): Customizable social VR platform for behavioral health, support groups, collaboration, corporate training, soft skills training and higher education. |
| 5. | QReal, LLC: Creation of lifelike photorealistic 3D interactive digital models and experiences in AR. |
| 6. | Glimpse Group Yazilim ve ARGE Ticaret Anonim Sirketi (“Glimpse Turkey”): a development center in Turkey, primarily developing and creating 3D models for QReal. |
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Key Business Developments During Fiscal Year 2024
Securities Purchase Agreement (“SPA”)
On September 28, 2023, the Company entered into a SPA with certain institutional investors to sell 1,885,715 shares of common stock for approximately $3.30 million (at $1.75 per share). The Company received the subscription receivable on October 3, 2023 which resulted in net proceeds (after placement agent fees, professional fees and listing expenses) of $2.98 million.
The SPA shares were issued on October 3, 2023. 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.
Nasdaq Listing Qualification Notice
On September 3, 2024, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for the prior 30 consecutive business days, the Company no longer meets the minimum bid price requirement for continued listing on the Nasdaq Capital Market. In accordance with Nasdaq Marketplace rules, the Company has a period of 180 calendar days from September 3, 2024, or until March 3, 2025, to regain compliance with the Minimum Bid Price Requirement. If at any time before March 3, 2025, the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement.
The Company’s receipt of the notification letter has no immediate effect on the listing of the Company’s shares, which will continue to trade uninterrupted on Nasdaq under the ticker “VRAR”. In addition, it does not affect the Company’s business, operations or reporting requirements with the Securities and Exchange Commission. In order to regain compliance with the Minimum Bid Price Requirements, the Company and its Board of Directors are reviewing various potential measures. The Company is not considering a reverse stock split at this time.
See 8-K filed on September 9, 2024 for additional information.
The Immersive Technology Markets
Virtual Reality (VR) fully immerses the user in a digital environment via a head mounted display (“HMD”), where the user is blocked out of their immediate physical environment. Augmented Reality (AR) is a less immersive experience, where the user views their immediate physical environment with digital images overlaid, via a phone, tablet or a dedicated HMD such as smart glasses. Spatial Computing are the computer processes and tools used to capture, process to blend 3D data into real physical space, often by utilizing VR and AR HMDs. While distinct, VR, AR and Spatial Computing are related, utilize some similar underlying technologies and are expected to become increasingly interconnected - combined they are often referred to as Immersive technology.
Immersive technologies are emerging technologies, and the markets for them are still nascent. We believe that Immersive technologies and solutions have the potential to fundamentally transform how people and businesses interact, further enabling remote work, education and commerce. Immersive technologies are also expected to increasingly interconnect with other emerging technologies such as AI, cloud computing, computer vision, big data, and blockchain. Additionally, HMD and telecommunication (5G) advancements have been driving vast improvements in capabilities and ease of use, while significantly reducing headset cost. As a result, market adoption has accelerated and is expected to continue. Leading technology companies such as Meta (formerly, Facebook), Apple, Microsoft, Google, ByteDance (Pico), Samsung, Sony, HTC and HP have been at the forefront of VR/AR hardware development and software infrastructure, while also increasing integration of their products with AR and VR capabilities.
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Since Meta released its first VR headset as a consumer product in 2016 (after its $2B+ acquisition of Oculus), successive iterations of it, as well as others, such as the Apple Vision Pro, have become significantly lighter, more comfortable, lower priced, with higher resolution and increasingly wireless/mobile. With a standalone mobile headset, users no longer need an expensive gaming computer to power the headset and they also do not have a wire tethered to that computer restricting movement. These advances have facilitated easier corporate procurement and integration. The accelerating rollout of 5G should enable further improvement in user experience since with 5G, remote processing and heavier, real time applications become possible without noticeable visual lag, allowing for lighter, smaller, more comfortable HMDs with longer battery life. Advances in AI technologies are expanding the Immersive technology space, enabling capabilities in massive data computing, digital twin creation, complex simulations, life like and intelligent interfaces and experiences and more.
Business Development and Sales
Each of our entities has its own business development and sales team to better focus on specific industry segments, with input and coordination from Glimpse’s management team.
Our management takes an active role in the business development activities of each entity and in the overall development and integration of sale strategies, goals and budgets. As an integral part of the business development and sales processes, each entity’s general manager is very familiar with the product offerings of the other entities and leverages those into his or her own efforts when appropriate.
On occasion, we enter into distribution partnerships for our products with third parties.
Competitive Environment
We believe that our competitors in the Immersive technology industry are focused on two primary segments: VR/AR Hardware (headsets) and Software.
Immersive Technology Hardware (Headsets) (“Hardware”):
We do not develop any Hardware, and our software and service solutions are mostly compatible with any Hardware. We believe that Hardware development, commercialization and distribution are highly capital intensive and there is not yet large enough scale or mass adoption in the Immersive technology industry to justify such expenditures for a smaller company. As such, there are relatively few participants on the Hardware side, some very large (for example: Meta (formerly, Facebook), Microsoft, Samsung, Google, Apple, ByteDance (Pico), HTC, HP, Lenovo, Sony and Epson) and some much smaller (for example: Magic Leap, XREAL, Varjo and Vuzix). In general, Hardware cycles have been accelerating and performance improving, with simplified usability and reduced end-user costs. The more advanced, easier to use and cheaper the Hardware becomes, the higher the potential for the development of robust software applications and increased market adoption of Immersive technology solutions.
We also believe that while the core computing is done on the headset, the size of the headset will remain relatively large/heavy and the level of applications limited. Therefore, in order to reach mass adoption, it is imperative in our view that the core computing move from the headset to the cloud and then transmitted back to the headset via 5G/broadband, allowing for a smaller/lighter form factor of the headset and more impactful applications. As part of our strategic shift to Spatial Core, Glimpse is focuses on providing the middleware enabling this transition.
Immersive Technology Software (“Software”):
In contrast to Hardware, Software is highly fragmented with hundreds of Software companies targeting different segments and solutions. Many are consumer oriented, whereas we are entirely enterprise focused (B2B and B2B2C). We believe that the Software segment is currently far less competitive than traditional software markets, as most companies in the space tend to be early stage and often underfunded.
While competition is evolving, there is currently no dominant player in any particular Immersive technology Software segment. We believe that we have the potential to become a leader in the this software space, led by our Spatial Core offerings.
As previously described, we believe that our structure, ecosystem and integrated capabilities create significant competitive advantages, not available to other Software companies in the Immersive technology space and significantly improving our ability to succeed in an emerging space.
We believe that there are a select number of earlier stage companies of approximately our size that provide Immersive technology and could be viewed as potential competitors. In addition, several of the larger technology players provide general infrastructure Software, such as, ARCore from Google and ARKit from Apple, which enable AR functionality on smartphones and tablets, and Unity and Unreal from Epic, which enable software languages used in VR and AR programing. We do not view these larger companies as competition, but rather as complementary to our business (indeed, some of these are our customers). We believe infrastructure software benefits us, and the industry at large, as they are not industry-specific and enable companies like us to more effectively build industry-specific solutions, thereby saving significant costs and development efforts.
Expansion and Diversification Strategy
As described above in “Competitive Environment,” the Immersive Technology Software and services industries are highly fragmented. There are numerous potential acquisition targets that, while having established a niche market position, product or technology, have limited resources and ability to pursue growth initiatives. We may continue to add to our ecosystem both companies and technologies, subject to the availability of capital and attractive deal terms. Beyond the expected financial impact of each such potential addition, these could also enhance our ecosystem, technology, scale and competitive position. These potential acquisitions may be domestic or international.
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Strategic Divestitures
Each one of our entities has the potential to be divested or spun off. Although our intent is to grow and develop the ecosystem, each of our entities targets a specific industry vertical (e.g., Healthcare, Education, Corporate Training, Military, etc.) and as such has a distinct set of potential acquirers or investors. If an entity is divested and the proceeds are substantive, then our intent is to distribute the majority of the net proceeds to our stockholder base, if such distribution would not jeopardize our growth and operations. We have, and may continue, to divest entities due to lower than expected performance or a shift in our strategic focus.
Intellectual Property
Our intellectual property is an integral part of our business strategy and practice. In accordance with industry practice, we protect our proprietary products, technology and competitive advantage through a combination of contractual provisions and trade secrets, patents, copyright and trademark laws in the United States and other jurisdictions where we conduct business.
As of the date of the filing of this Report, and as summarized in the table below, we have been issued 10 patents by the United States Patent and Trademark Office (“USPTO”) and have an additional 5 filed patent applications in process.
Issued Patents
| Name | Entity | Filing Date*Patent # | US Patent # | |||
| SIMULATED REALITY CROSS PLATFORM SYSTEM | Foretell Studios, LLC | 4/23/2020 | 16/857,015 | |||
| MARKER-BASED POSITIONING OF SIMULATED REALITY | Sector 5 Digital LLC | 4/23/2020 | 16/856,916 | |||
| AUGMENTED REALITY GEOLOCATION USING IMAGE MATCHING | Sector 5 Digital LLC | 8/22/2018 | 16/108,830 | |||
| INTERACTIVE MIXED REALITY SYSTEM FOR A REAL-WORLD EVENT | The Glimpse Group, Inc. | 6/21/2018 | 16/014,956 | |||
| SYSTEM FOR SHARING USER-GENERATED CONTENT | The Glimpse Group, Inc. | 6/12/2019 | 16/439,280 | |||
| IMMERSIVE DISPLAY SYSTEM WITH ADJUSTABLE PERSPECTIVE | The Glimpse Group, Inc. | 11/27/2018 | 16/201,863 | |||
| SIMULATED REALITY TRANSITION ELEMENT LOCATION | The Glimpse Group, Inc. | 6/15/2020 | 16/901,830 | |||
| SIMULATED REALITY ADAPTIVE USER SPACE | Foretell Studios, LLC | 7/27/2020 | 16/939,504 | |||
| IMMERSIVE ECOSYSTEM | Brightline Interactive, LLC | 6/4/2024 | 12/002,180 | |||
| SYSTEM AND METHOD FOR GENERATING AN AUGMENTED REALITY EXPERIENCE | Brightline Interactive, LLC | 11/19/2020 | 16/953,264 |
* Each of the patents listed above expires 20 years from its filing date.
Filed Patents
| Name | Entity | Filing Date | US Patent # | |||
| AUDIO PROCESSING IN A VIRTUAL ENVIRONMENT | Adept Reality, LLC | 6/15/2022 | 17/841,258 | |||
| REAL-TIME VISUALIZATION OF HEAD MOUNTED DISPLAY USER REACTIONS | Foretell Studios, LLC | 4/6/2022 | 17/714,953 | |||
| DISPOSITIONAL AFFECT FOR VIRTUAL CHARACTER INTERACTIONS IN VR APPS | The Glimpse Group, Inc. | 6/13/2023 | 18/401,868 | |||
| BE ANYONE AND ANYTHING | Foretell Studios, LLC | 12/13/2022 | 18/401,879 | |||
| SPATIAL CORE: A COLLABORATIVE SPATIAL COMPUTING PLATFORM | Brightline Interactive, LLC | 6/1/2023 | 63/470,293 | |||
| CONTROLLED NON-HUMAN CONVERSATION FLOW IN VR | The Glimpse Group, Inc. | 4/3/2023 | 63/456,571 |
We may continue to file for patents regarding various aspects of our products, services and technologies in the future depending on the costs and timing associated with such filings. We may make investments to further strengthen our copyright protection going forward, although no assurances can be given that we will be successful in such patent and trademark protection endeavors. We seek to limit disclosure of our intellectual property by requiring employees, consultants, and partners with access to our proprietary information to execute confidentiality agreements and non-competition agreements (when applicable) and by restricting access to our proprietary information. Due to rapid technological change, we believe that establishing and maintaining an industry and technology advantage in factors such as the expertise and technological and creative skills of our personnel, as well as new services and enhancements to our existing services, are more important to our business and profitability than other available legal protections. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or to obtain and use information that we regard as proprietary. The laws of many countries do not protect proprietary rights to the same extent as the laws of the United States. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results and financial condition. There can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar services or products. Any failure by us to adequately protect our intellectual property could have a material adverse effect on our business, operating results and financial condition. See “Risk Factors-Risks Related to our Business.”
Business Cycles
Based on our history and information available to date, we have not been able to identify any seasonality of cycles within our business. Since Immersive technology is an emerging industry, market and customer education are material and therefore the length of the typical sales cycle can be between three and 18 months, depending on the size and complexity of the proposed solution and the customer’s level of understanding of the Immersive technology space and prior experience.
Economic Dependence
For the year ended June 30, 2024, one customer accounted for approximately 23% of our revenues and another for approximately 15% of our revenues. No other customer accounted for more than 10% of our revenues for the year ended June 30, 2024. For the year ended June 30, 2023, one customer accounted for approximately 26% of our revenues and another for approximately 21% of our revenues. No other customer accounted for more than 10% of our revenues for the year ended June 30, 2023.
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We operate in an early stage industry, and customers are exploring various options for Immersive technology solutions and acting as early adopters of these solutions. As such, there has been a high degree of variance on our source of revenues. A customer that may account for a higher concentration of revenue in one period may not account for any revenue in subsequent periods. A significant reduction in revenue from our larger customers could have a material negative impact on our operations.
Typically, customer contracts can be canceled at any time by the customer upon 30-90 days’ written notice (depending on the size and complexity of the contract). In such an event, the customer would owe us unpaid amounts up until the point of cancelation. For most customers we charge 25-50% of the contract value upfront and the amounts are usually not refundable, mitigating some of the contract cancellation risk. While it does happen on occasion, it is uncommon that a signed contract is canceled.
Human Capital
At June 30, 2024, we had 112 full time employees, primarily software developers, engineers and 3D artists. Of these, 56 are based in the United States and 56 are based in Turkey.
Corporate Information
Our website is www.theglimpsegroup.com. Information contained on, or accessible through our website, is not and shall not be deemed to be part of, or incorporated or deemed incorporated by reference into, this Report, and should not be relied upon by prospective investors for the purposes of determining whether to invest in us or our securities. We have included our website address in this Report solely as an inactive textual reference.
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ITEM 1A. RISK FACTORS
Investing in us involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information in this Report, including our consolidated financial statements and related notes and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, before investing in us. Any of the risks and uncertainties we describe below could adversely affect our business, financial condition, results of operations, prospects or the trading price of our securities. The risks described below are not the only ones we face and additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results, prospects and the trading price of our securities.
Risks Related to Our Business
We are an early stage technology company.
We were incorporated in June 2016 and are an early stage technology development company, comprised of a wholly-owned group of early stage entities in Immersive technology space. As such, we are subject to the risks associated with being an early stage company operating in an emerging industry, including, but not limited to, the risks set forth herein.
We have incurred significant net losses since inception and anticipate that we will continue to incur net losses for the foreseeable future and may never achieve or maintain profitability. There is also doubt about our ability to continue as a going concern.
We have incurred significant net losses since inception. For the fiscal years ended June 30, 2024 and 2023, we incurred a net loss of $6.39 million and $28.6 million, respectively. As of June 30, 2024, we had an accumulated deficit of $63 million. To date, we have devoted our efforts towards securing financing, building and evolving our technology platform and creating an infrastructure that allows for the growth of such technology platform. While the Company’s cash flow has improved in recent months, we may continue to generate negative cash flow for the foreseeable future. While the Company intends to generate positive cash flow in the coming 12 months, its cash and cash equivalents as of June 30, 2024 may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements. We will need to generate significant additional revenue to achieve and sustain profitability, and we cannot assure that we will be able to do so.
The combination of operating losses, cash expected to be used to continue operating activities and uncertain conditions relating to additional capital raises and continued revenue growth creates an uncertainty about our ability to continue as a going concern. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.
We may not be successful in raising additional capital necessary to meet expected funding needs. If we need additional funding for operations and we are unable to raise it, we may not be able to continue our business operations.
We expect our capital needs to continue in order to maintain and expand our operations. Our ability to raise additional funds through equity or debt financings or other sources will depend on the financial success of our current business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control. No assurance can be given that we will be successful in raising the required capital at a reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on stockholders and any debt financing, if available, may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our business operations and advance our growth initiatives, which could adversely impact our business, financial condition and results of operations.
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Our market is competitive and dynamic. New competing products and services could be introduced at any time that could result in reduced profit margins and loss of market share.
The Immersive technology industries are very dynamic, with new technology and services being introduced by a range of players, from larger established companies to start-ups, on a frequent basis. Our competitors may announce new products, services, or enhancements that better meet the needs of end-users or changing industry standards. Further, new competitors or alliances among competitors could emerge. Increased competition may cause price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, the worldwide Immersive technology markets are increasingly competitive. A number of companies developing Immersive technology products and services compete for a limited number of customers. Some of our competitors in this market have substantially greater financial and other resources, larger research and development staffs, and more experience and capabilities in developing, marketing and distributing products. Potential pricing pressure could result in significant price erosion, reduced profit margins and loss of market share, any of which could have a material adverse effect on our business, results of operations, financial position and liquidity.
Competitive pricing pressure may reduce our gross profits and adversely affect our financial results.
If we are unable to maintain our pricing due to competitive pressures or other factors, our margins will be reduced and our gross profits, business, results of operations, and financial condition would be adversely affected. The subscription prices for our software platforms, cloud modules, and professional services may decline for a variety of reasons, including competitive pricing pressures, discounts, anticipation of the introduction of new solutions by our competitors, or promotional programs offered by us or our competitors. Competition continues to increase in the market segments in which we operate, and we expect competition to further increase in the future.
Our plans for growth will place significant demands upon our resources. If we are unsuccessful in achieving our plan for growth, our business could be harmed.
We are actively marketing our products domestically and internationally. The plan places significant demands upon managerial, financial, and human resources. Our ability to manage future growth will depend in large part upon several factors, including our ability to rapidly:
| ● | build or leverage, as applicable, a network of business partners to create an expanding presence in the evolving marketplace for our products and services; |
| ● | build or leverage, as applicable, sales teams to keep end-users and business partners informed regarding the technical features, issues and key selling points of our products and services; |
| ● | attract and retain qualified technical personnel in order to continue to develop reliable and flexible products and provide services that respond to evolving customer needs; |
| ● | develop support capacity for end-users as sales increase, so that we can provide post-sales support without diverting resources from product development efforts; and |
| ● | expand our internal management and financial controls significantly, so that we can maintain control over our operations and provide support to other functional areas as the number of personnel and size increases. |
Our inability to achieve any of these objectives could harm our business, financial condition and results of operations.
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We have material customer concentration, with a limited number of customers accounting for a material portion of our revenues.
For the fiscal years ended June 30, 2024 and 2023, our five largest customers accounted for approximately 53% and 59% of our revenues, respectively. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future level of demand for our services that will be generated by these customers or the future demand for the products and services of these customers in the end-user marketplace. In addition, revenues from these customers may fluctuate from time to time based on the commencement and completion of projects, the timing of which may be affected by market conditions or other facts, some of which may be outside of our control. Further, some of our contracts with these customers permit them to terminate our services at any time (subject to notice and certain other provisions). If any of these customers experience declining or delayed sales due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our services or we could lose a major customer. Any such development could have an adverse effect on our margins and financial position, and would negatively affect our revenues and results of operations and/or trading price of our common stock.
Our future growth depends on our ability to attract and retain customers, and the loss of existing customers, or failure to attract new ones, could adversely impact our business and future prospects.
The size of our community of customers on our platforms is critical to our success. Our ability to achieve profitability in the future will depend, in large part, on our ability to add new customers, while retaining and even expanding offerings to existing customers. Our customers can generally decide to cease using our solutions at any time. Achieving growth in our customer base may require us to engage in increasingly sophisticated and costly sales and marketing efforts that may not result in additional customers. We may also need to modify our pricing model to attract and retain such customers. If we fail to attract new customers or fail to maintain or expand existing relationships in a cost-effective manner, our business and future prospects may be materially and adversely impacted.
We anticipate our products and technologies will require ongoing research and development and we may experience technical problems or delays and may not have the funds necessary to continue their development, which could lead our business to fail.
Our research and development (“R&D”) efforts are subject to the risks typically associated with the development of new products and technologies based on emerging and innovative technologies, including, for example, unexpected technical problems or the possible insufficiency of funds for completing development of these products or technologies. If we experience technical problems or delays, further improvements in our products or technologies and the introduction of future products or technologies could be delayed, and we could incur significant additional expenses and our business may fail.
We anticipate that we may require additional funds to increase or sustain our current levels of expenditure for the R&D of new products and technologies, and to obtain and maintain patents and other intellectual property rights in these technologies, the timing and amount of which are difficult to forecast. Any funds we need may not be available on commercially reasonable terms or at all. If we cannot obtain the necessary additional capital when needed, we might be forced to reduce our R&D efforts which would materially and adversely affect our business. If we raise capital in an offering of our common stock, preferred stock or securities convertible into our common stock, our then-existing stockholders’ interests will be diluted.
Our success depends on our ability to anticipate technological changes and develop new and enhanced products and services.
The markets for our products and services are characterized by rapidly changing technology, evolving industry standards and increasingly sophisticated customer requirements. The introduction of products embodying new technology and the emergence of new industry standards can negatively impact the marketability of our existing products and can exert price pressures on existing products. It is critical to our success that we are able to anticipate and react quickly to changes in technology or in industry standards and to successfully develop, introduce, and achieve market acceptance of new, enhanced and competitive products and services on a timely basis and cost-effective basis. We invest substantial resources towards continued innovation; however, there can be no assurance that we will successfully develop new products and services or enhance and improve our existing products and services, that new products and services and enhanced and improved existing products and services will achieve market acceptance or that the introduction of new products and services or enhanced existing products and services by others will not negatively impact us. Our inability to develop products and services that are competitive in technology and price and that meet end-user needs could have a material adverse effect on our business, financial condition or results of operations.
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Development schedules for technology products and services are inherently uncertain. We may not meet our products and/or services development schedules, and development costs could exceed budgeted amounts. Our business, results of operations, financial position and liquidity may be materially and adversely affected if the products or product enhancements that we develop are delayed or not delivered due to developmental problems, quality issues or component shortage problems, or if our products or product enhancements do not achieve market acceptance or are unreliable. We or our competitors will continue to introduce products embodying new technologies. In addition, new industry standards may emerge. Such events could render our existing products obsolete or not marketable, which would have a material adverse effect on our business, results of operations, financial position and liquidity.
We place significant decision making powers with our underlying entities’ management, which presents certain risks that may cause the operating results of individual entities to vary.
We believe that our practice of placing significant decision making powers with each of our entities’ management is important to our successful growth and allows us to be responsive to opportunities and to our customers’ needs. However, this practice could make it difficult to coordinate procedures across our operations and presents certain risks, including the risk that we may be slower or less effective in our attempts to identify or react to problems affecting an important business issue, or that we would be slower to identify a misalignment between an entity’s and our overall business strategy. Inconsistent implementation of corporate strategy and policies at the entity level could materially and adversely affect our financial position, results of operations and cash flows and prospects.
The operating results of an underlying entity may differ from those of another entity for a variety of reasons, including market size, customer base, competitive landscape, regulatory requirements and economic conditions affecting a particular industry vertical. As a result, certain of our entities may experience higher or lower levels of profitability and growth than other entities.
Our centralized management will have significant discretion over directing our resources and if management does not allocate resources effectively, our business, financial condition or result of operations could be harmed.
Our centralized management has significant discretion over directing our resources to any and all of our entities. As a consequence, it is possible that one or more of our entities will not receive adequate capital or management resources. If an entity does not receive adequate capital or resources, it may not be able to commercialize its products and services, or if its products and services are already commercialized, it may not be able to keep such products and services competitive. Therefore, if we don’t allocate resources effectively, our business, financial condition or result of operations could be harmed.
The failure to attract, hire, retain and motivate key personnel could have a significant adverse impact on our operations.
Our success depends on the retention and maintenance of key personnel, including members of senior management and our technical, sales and marketing teams. Achieving this objective may be difficult due to many factors, including competition for such highly skilled personnel, fluctuations in global economic and industry conditions, changes in our management or leadership, competitors’ hiring practices, and the effectiveness of our compensation programs. The loss of any of these key persons could have a material adverse effect on our business, financial condition or results of operations. Competition for qualified employees is particularly intense in the technology industry. Our failure to attract and to retain the necessary qualified personnel could seriously harm our operating results and financial condition. Competition for such personnel can be intense, and no assurance can be provided that we will be able to attract or retain highly qualified technical and managerial personnel in the future, which may have a material adverse effect on our future growth and profitability.
The continued operation of our business depends on the performance and reliability of the Internet, mobile networks, and other infrastructure that is not under our control.
Our business depends on the performance and reliability of the Internet, mobile networks, and other infrastructure that is not under our control. Disruptions in such infrastructure, including as the result of power outages, telecommunications delay or failure, security breach, or computer virus, as well as failure by telecommunications network operators to provide us with the bandwidth we need to provide our products and offerings, could cause delays or interruptions to our products, offerings, and platforms. Any of these events could damage our reputation, resulting in fewer users actively using our platforms, disrupt our operations, and subject us to liability, which could adversely affect our business, financial condition, and operating results.
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If we do not make our platforms, including new versions or technology advancements, easier to use or properly train customers on how to use our platforms, our ability to broaden the appeal of our products and services and to increase our revenue could suffer.
In order to get full use of our platforms, users may require need training. We provide a variety of training and support services to our customers, and we believe we will need to continue to maintain and enhance the breadth and effectiveness of our training and support services as the scope and complexity of our platforms increase. If we do not provide effective training and support resources for our customers on how to efficiently and effectively use our platforms, our ability to grow our business will suffer, and our business and results of operations may be adversely affected. Additionally, when we announce or release new versions of our platforms or advancements in our technology, we could fail to sufficiently explain or train our customers on how to use such new versions or advancements or we may announce or release such versions prematurely. These failures on our part may lead to our customers being confused about use of our products or expected technology releases, and our ability to grow our business, results of operations, brand and reputation may be adversely affected.
Interruptions, performance problems or defects associated with our platforms may adversely affect our business, financial condition and results of operations.
Our reputation and ability to attract and retain customers and grow our business depends in part on our ability to operate our platforms at high levels of reliability, scalability and performance, including the ability of our existing and potential customers to access our platforms at any time and within an acceptable amount of time. Interruptions in the performance of our platforms, whether due to system failures, computer viruses or physical or electronic break-ins, could affect the availability of our platforms. We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of customers accessing our platforms simultaneously, denial of service attacks or other security-related incidents.
It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our customer base grows and our platforms becomes more complex. If our platforms are unavailable or if our customers are unable to access our platforms within a reasonable amount of time or at all, we may experience a loss of customers, lost or delayed market acceptance of our platforms, delays in payment to us by customers, injury to our reputation and brand, legal claims against us, significant cost of remedying these problems and the diversion of our resources. In addition, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, financial condition and results of operations, as well as our reputation, may be adversely affected.
Further, the software technologies underlying our platforms are inherently complex and may contain material defects or errors, particularly when new products are first introduced or when new features or capabilities are released. We have from time to time found defects or errors in our platforms, and new defects or errors in our existing platforms or new products may be detected in the future by us or our users. We cannot assure you that our existing platforms and new products will not contain defects. Any real or perceived errors, failures, vulnerabilities, or bugs in our platforms could result in negative publicity or lead to data security, access, retention or other performance issues, all of which could harm our business. The costs incurred in correcting such defects or errors may be substantial and could harm our business. Moreover, the harm to our reputation and legal liability related to such defects or errors may be substantial and could significantly harm our business.
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If we fail to timely release updates and new features to our platforms and adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or changing customer needs, requirements or preferences, our platforms may become less competitive.
The markets in which we compete are subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. Accordingly, our ability to increase our revenue depends in large part on our ability to maintain, improve and differentiate our existing platforms and introduce new functionality.
We must continue to improve existing features and add new features and functionality to our platforms in order to retain our existing customers and attract new ones. If the technology underlying our platforms become obsolete or do not address the needs of our customers, our business would suffer.
Revenue growth from our products depends on our ability to continue to develop and offer effective features and functionality for our customers and to respond to frequently changing data protection regulations, policies and end-user demands and expectations, which will require us to incur additional costs to implement. If we do not continue to improve our platforms with additional features and functionality in a timely fashion, or if improvements to our platforms are not well received by customers, our revenue could be adversely affected.
If we fail to deliver timely releases of our products that are ready for commercial use, release a new version, service, tool or update with material errors, or are unable to enhance our platforms to keep pace with rapid technological and regulatory changes or respond to new offerings by our competitors, or if new technologies emerge that are able to deliver competitive solutions at lower prices, more efficiently, more conveniently or more securely than our solutions, or if new operating systems, gaming platforms or devices are developed and we are unable to support our customers’ deployment of games and other applications onto those systems, platforms or devices, our business, financial condition and results of operations could be adversely affected.
A failure in our information technology systems could cause interruptions in our services, undermine the responsiveness of our services, disrupt our business, damage our reputation and cause losses.
Our information technology systems support all phases of our operations, including finance, marketing, customer development and the business of customer support services. If our systems fail to perform, we could experience disruptions in operations, slower response time or decreased customer satisfaction. System interruptions, errors or downtime can result from a variety of causes, including changes in customer usage patterns, technological failures, changes to our systems, linkages with third-party systems and power failures. Our systems may be vulnerable to disruptions from human error, execution errors, errors in models, employee misconduct, unauthorized trading, external fraud, computer viruses, distributed denial of service attacks, computer viruses or cyberattacks, terrorist attacks, natural disaster, power outage, capacity constraints, software flaws, events impacting key business partners and vendors, and similar events.
It could take an extended period of time to restore full functionality to our technology or other operating systems in the event of an unforeseen occurrence. Instances of fraud or other misconduct might also negatively impact our reputation and customer confidence in us, in addition to any direct losses that might result from such instances. Despite our efforts to identify areas of risk, oversee operational areas involving risks, and implement policies and procedures designed to manage these risks, there can be no assurance that we will not suffer unexpected losses, reputational damage or regulatory actions due to technology or other operational failures or errors, including those of our vendors or other third parties.
If we fail to prevent security breaches, improper access to or disclosure of our data or user data, or other hacking and attacks, we may lose users, and our business, reputation, financial condition and results of operations may be materially and adversely affected.
Our business can include the hosting and/or transmission of proprietary information and sensitive or confidential data. In connection with our services business, some of our employees also have access to its customers’ confidential data and other information, which could be compromised, whether intentionally or unintentionally, by our employees, consultants or vendors.
We have privacy and data security policies in place that are designed to prevent security breaches and we have employed significant resources to develop our security measures against breaches. However, as technologies evolve, and the portfolio of the service providers with which we share confidential information with grows, we could be exposed to increased risk of breaches in security and other illegal or fraudulent acts, including cyberattacks. The evolving nature of such threats, in light of new and sophisticated methods used by criminals and cyberterrorists, including computer viruses, malware, phishing, misrepresentation, social engineering and forgery, is making it increasingly challenging to anticipate and adequately mitigate these risks.
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We may be subject to these types of attacks. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liabilities, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyberattacks. Cyberattacks may target us, our suppliers, customers or other participants, or the internet infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. While we do carry cybersecurity insurance, we may not be able to mitigate such risks to any third party. Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income.
A compromise of the security of our information technology systems leading to theft or misuse of our own or our clients’ proprietary or confidential information, or the public disclosure or use of such information by others, could result in losses, third-party claims against us and reputational harm, including the loss of clients. The theft or compromise of our or our clients’ information could negatively impact our reputation, financial results and prospects. In addition, if our reputation is damaged due to a data security breach, our ability to attract new engagements and clients may be impaired or we may be subjected to damages or penalties, which could negatively impact our businesses, financial results or financial condition.
Our financial results may fluctuate substantially for many reasons, and past results should not be relied on as indications of future performance.
Our revenues and operating results may fluctuate from quarter to quarter and from year to year due to a combination of factors, including, but not limited to:
| ● | varying size, timing and contractual terms of orders for our products and services, which may delay the recognition of revenue; |
| ● | competitive conditions in the industry, including strategic initiatives by us or our competitors, new products or services, product or service announcements and changes in pricing policy by us or our competitors; |
| ● | market acceptance of our products and services; |
| ● | our ability to maintain existing relationships and to create new relationships with customers and business partners; |
| ● | the discretionary nature of purchase and budget cycles of our customers and end-users; |
| ● | the length and variability of the sales cycles for our products; |
| ● | general weakening of the economy resulting in a decrease in the overall demand for our products and services or otherwise affecting the capital investment levels of businesses with respect to our products or services; |
| ● | timing of product development and new product initiatives; |
| ● | changes in customer mix; |
| ● | increases in the cost of, or limitations on, the availability of materials; |
| ● | changes in product mix; and |
| ● | increases in costs and expenses associated with the introduction of new products. |
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Further, the markets that we serve are volatile and subject to market shifts that we may be unable to anticipate. A slowdown in the demand for Immersive technology products and services can have a significant adverse effect on the demand for our products and services in any given period. Our customers may cancel or delay purchase orders for a variety of reasons, including, but not limited to, the rescheduling of new product introductions, changes in our customers’ inventory practices or forecasted demand, general economic conditions affecting our customers’ markets, changes in our pricing or the pricing of our competitors, new product announcements by us or others, quality or reliability problems related to our products, or selection of competitive products as alternate sources of supply.
Thus, there can be no assurance that we will be able to reach profitability on a quarterly or annual basis. We believe that our revenue and operating results will continue to fluctuate, and that period-to-period comparisons are not necessarily indications of future performance. Our revenue and operating results may fail to meet the expectations of public market analysts or investors, which could have a material adverse effect on the price of our common stock. In addition, portions of our expenses are fixed and difficult to reduce if our revenues do not meet our expectations. These fixed expenses magnify the adverse effect of any revenue shortfall.
Our plans for implementing our business strategy and achieving profitability are based upon the experience, judgment and assumptions of our key management personnel, and available information concerning the communications and technology industries. If management’s assumptions prove to be incorrect, it could have a material adverse effect on our business, financial condition or results of operations.
Risks Related to Our Acquisition Strategy
We may be unable to obtain additional financing, if required, to fund the existing operations of the business, complete future acquisitions or to fund the development and commercialization of the companies, technologies, or intellectual property.
Our primary business strategy is to (i) generate and increase revenues of our existing entities and (ii) to further enhance our presence in the Immersive technology market through the acquisition of additional companies, technologies, or intellectual property. If our existing entities do not achieve sufficient levels of revenue and profits, we may be required to seek additional financing through the issuance of equity or debt securities or other arrangements to finance the operations of the business.
Additionally, there can be no assurance that we will be able to successfully identify, acquire or profitably manage such additional companies, technologies, or intellectual property or successfully integrate these, if any, into the Glimpse ecosystem without substantial costs, delays or other operational or financial problems. If potential acquisition targets are unwilling to accept our equity as the consideration for their businesses, then we may be required to seek additional financing through the issuance of equity or debt securities or other arrangements to finance the acquisition transaction. If we complete a business combination, we may require additional financing to fund the operations or growth of an acquisition target. Further, acquisitions involve a number of other special risks, including possible adverse effects on our operating results, diversion of management’s attention, dependence on retention, hiring and training of key personnel, risks associated with unanticipated problems or legal liabilities, and realization of acquired intangible assets, some or all of which could have a material adverse effect on our business, financial condition and results of operations. In addition, there can be no assurance that the companies, technologies, or intellectual property acquired in the future, if any, will generate anticipated revenues and earnings. As a result, we may be required to seek additional financing through the issuance of equity or debt securities or other arrangements. To the extent that we are unable to acquire additional companies, technologies, or intellectual property or integrate those successfully, our ability to generate and increase our revenues may be reduced significantly. As a result, we may be required to seek additional financing through the issuance of equity or debt securities or other arrangements. As an early-stage company, we cannot assure that such financing will be available on acceptable terms, if at all.
With respect to our future acquisition strategy, no assurance can be made that we will have the funds necessary to make future acquisitions. To the extent that additional financing proves to be unavailable, that fact will likely have a negative impact on our business and we may be compelled to restructure the operations of the business or abandon a particular contemplated business combination.
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If we fail to integrate any existing or acquired entities into the Glimpse ecosystem, we may not realize the anticipated benefits of the collaborative Glimpse ecosystem and the integration of any acquisitions, which could harm our business, financial condition or results of operations.
Even though Glimpse’s ecosystem provides a centralized corporate structure and the potential for cross company collaboration synergies, each entity has its own business development, technology development, sales team and general manager. Although we believe that the integration of our existing entities has been a success, there is still continued risk that we may encounter difficulties related to continued integration of the existing entities in the future. There is also the risk that the business development, sales team and general manager of a future acquired entity are unsuccessful. Some of these risks are out of our control. Successfully integrating any acquired entity may be more difficult, costly or time-consuming than we anticipate, or we may not otherwise realize any of the anticipated benefits of such acquisition. Any of the foregoing could adversely affect our business, financial condition or results of operations.
We may make more acquisitions in the future. Our ability to identify complementary assets, products or businesses for acquisition and successfully integrate them could affect our business, financial condition and operating results.
In the future, we may continue to pursue acquisitions of assets, products or businesses that we believe are complementary to our existing business and/or to enhance our market position or expand our product portfolio. There is a risk that we will not be able to identify suitable acquisition candidates available for sale at reasonable prices, complete any acquisition, or successfully integrate any acquired product or business into our operations. We may face competition for acquisition candidates from other parties including those that have substantially greater available resources. Acquisitions may involve a number of other risks, including:
| ● | diversion of management’s attention from other of our entities ; |
| ● | disruption to our ongoing business; |
| ● | failure to retain key acquired personnel; |
| ● | difficulties in integrating acquired operations, technologies, products, or personnel; |
| ● | unanticipated expenses, events, or circumstances; |
| ● | assumption of disclosed and undisclosed liabilities; and |
| ● | inappropriate valuation of the acquired in-process R&D, or the entire acquired business. |
If we do not successfully address these risks or any other problems encountered in connection with an acquisition, the acquisition could have a material adverse effect on our business, results of operations and financial condition. Problems with an acquired business could have a material adverse effect on our performance or our business as a whole. In addition, if we proceed with an acquisition, our available cash may be used to complete the transaction, diminishing our liquidity and capital resources, or shares may be issued which could cause significant dilution to existing stockholders.
Risks Related to Our Intellectual Property
If we cannot obtain and maintain appropriate patent and other intellectual property rights protection for our technology, our business will suffer.
The value of our software and services is dependent on our ability to secure and maintain appropriate patent and other intellectual property rights protection. We intend to continue to pursue additional patent protection for our new software and technology. Although we own multiple patents covering our technology that have already been issued, we may not be able to obtain additional patents that we apply for, or that any of these patents, once issued, will give us commercially significant protection for our technology, or will be found valid if challenged. Moreover, we have not obtained patent protection for our technology in all foreign countries in which our products might be sold. In any event, the patent laws and enforcement regimes of other countries may differ from those of the United States as to the patentability of our personal display and related technologies and the degree of protection afforded.
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Any patent or trademark owned by us may be challenged and invalidated or circumvented. Patents may not be issued from any of our pending or future patent applications. Any claims and issued patents or pending patent applications may not be broad or strong enough and may not be issued in all countries where our products can be sold or our technologies may not be licensed to provide meaningful protection against any commercial damage to us. Further, others may develop technologies that are similar or superior to our technologies, duplicate our technologies or design around the patents owned by us. Effective intellectual property protection may be unavailable or limited in certain foreign countries. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise use aspects of our processes and devices that we regard as proprietary. Policing unauthorized use of our proprietary information and technology is difficult and our efforts to do so may not prevent misappropriation of our technologies. In the event that our intellectual property protection is insufficient to protect our intellectual property rights, we could face increased competition in the market for our products and technologies, which could have a material adverse effect on our business, financial condition and results of operations.
We may become engaged in litigation to protect or enforce our patent and other intellectual property rights or in International Trade Commission proceedings to abate the importation of goods that would compete unfairly with our products. In addition, we may have to participate in interference or reexamination proceedings before the USPTO, or in opposition, nullification or other proceedings before foreign patent offices, with respect to our patents or patent applications. All of these actions would place our patents and other intellectual property rights at risk and may result in substantial costs to us as well as a diversion of management attention. Moreover, if successful, these actions could result in the loss of patent or other intellectual property rights protection for the key technologies on which our business strategy depends.
In addition, we rely in part on unpatented proprietary technology, and others may independently develop the same or similar technology or otherwise obtain access to our unpatented technology. To protect our trade secrets, know-how and other proprietary information, we require employees, consultants, financial advisors and strategic partners to enter into confidentiality agreements. These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of those trade secrets, know-how or other proprietary information. In particular, we may not be able to fully or adequately protect our proprietary information as we conduct discussions with potential strategic partners. If we are unable to protect the proprietary nature of our technology, it will harm our business.
Despite our efforts to protect our intellectual property rights, intellectual property laws afford us only limited protection. A third party could copy or otherwise obtain information from us without authorization. Accordingly, we may not be able to prevent misappropriation of our intellectual property or to deter others from developing similar products or services. Further, monitoring the unauthorized use of our intellectual property is difficult. Litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources, may result in counterclaims or other claims against us and could significantly harm our results of operations. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States.
As is commonplace in technology companies, we employ individuals who were previously employed at other technology companies. To the extent our employees are involved in research areas that are similar to those areas in which they were involved at their former employers, we may be subject to claims that such employees or we have, inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims. Litigation of this type could result in substantial costs to us and divert our resources.
We also depend on trade secret protection through confidentiality and license agreements with our employees, entities, licensees, licensors and others. We may not have agreements containing adequate protective provisions in every case, and the contractual provisions that are in place may not provide us with adequate protection in all circumstances. The unauthorized reproduction or other misappropriation of our intellectual property could diminish the value of our brand, competitive advantages or goodwill and result in decreased sales.
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We may incur substantial costs or lose important rights as a result of litigation or other proceedings relating to our products, patents and other intellectual property rights.
In recent years, there has been significant litigation involving patents and other intellectual property rights in many technology-related industries. Until recently, patent applications were retained in secrecy by the USPTO until and unless a patent was issued. As a result, there may be U.S. patent applications pending of which we are unaware that may be infringed by the use of our technology or a part thereof, thus substantially interfering with the future conduct of our business. In addition, there may be issued patents in the United States or other countries that are pertinent to our business of which we are not aware. We and our customers could be sued by other parties for patent infringement in the future. Such lawsuits could subject us and them to liability for damages or require us to obtain additional licenses that could increase the cost of our products, which might have an adverse effect on our sales.
In addition, in the future we may assert our intellectual property rights by instituting legal proceedings against others. We may not be able to successfully enforce our patents in any lawsuits we may commence. Defendants in any litigation we may commence to enforce our patents may attempt to establish that our patents are invalid or are unenforceable. Any patent litigation could lead to a determination that one or more of our patents are invalid or unenforceable. If a third party succeeds in invalidating one or more of our patents, we may experience greater competition from such party and from others. Our ability to derive sales from products or technologies covered by these patents could be adversely affected.
Whether we are defending the assertion of third party intellectual property rights against our business as a result of the use of our technology, or we are asserting our own intellectual property rights against others, such litigation can be complex, costly, protracted and highly disruptive to our business operations by diverting the attention and energies of management and key technical personnel. As a result, the pendency or adverse outcome of any intellectual property litigation to which we are subject could disrupt business operations, require the incurrence of substantial costs and subject us to significant liabilities, each of which could severely harm our business.
Plaintiffs in intellectual property cases often seek injunctive relief. Any intellectual property litigation commenced against us could force us to take actions that could be harmful to our business and thus to our sales, including the following:
| ● | discontinuing selling the products that incorporate or otherwise use technology that contains our allegedly infringing intellectual property; |
| ● | attempting to obtain a license to the relevant third party intellectual property, which may not be available on reasonable terms or at all; or |
| ● | attempting to redesign our products to remove our allegedly infringing intellectual property. |
If we are forced to take any of the foregoing actions, we may be unable to sell products that incorporate our technology at a profit or at all. Furthermore, the measure of damages in intellectual property litigation can be complex, and is often subjective or uncertain. If we were to be found liable for infringement of proprietary rights of a third party, the amount of damages we might have to pay could be substantial and is difficult to predict. Decreased sales of our products incorporating our technology would adversely affect our results of operations. Any necessity to procure rights to the third party technology might cause us to negotiate the royalty terms of the third party license which could increase our cost of production or, in certain cases, terminate our ability to build some of our products entirely.
Our failure to renew, register or otherwise protect our trademarks could have a negative impact on the value of our brand names and our ability to use those names in certain geographical areas.
We believe our copyrights and trademarks are integral to our success. We rely on trademark, copyright and other intellectual property laws to protect our proprietary rights. If we fail to properly register and otherwise protect our trademarks, service marks and copyrights, we may lose our rights, or our exclusive rights, to them. In that case, our ability to effectively market and sell our products and services could suffer, which could harm our business.
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Risks Related to Our Securities and Other Risks
Our stock price may be volatile, and the value of our common stock may decline.
Our stock price may be volatile. Factors that could cause fluctuations in the trading price of our common stock include the following:
| ● | actual or anticipated fluctuations in our financial condition or results of operations; |
| ● | variance in our financial performance from expectations of securities analysts; |
| ● | changes in the pricing of the solutions on our platforms; |
| ● | changes in our projected operating and financial results; |
| ● | changes in laws or regulations applicable to our platforms; |
| ● | announcements by us or our competitors of significant business developments, acquisitions or new offerings; |
| ● | sales of shares of our common stock by us or our stockholders, the expectation of future sales of our common stock by us or our stockholders, and/or the anticipation of lock-up releases; |
| ● | significant data breaches, disruptions to or other incidents involving our platforms; |
| ● | our involvement in litigation; |
| ● | conditions or developments affecting the Immersive technology industries; |
| ● | changes in senior management or key personnel; |
| ● | the trading volume of our common stock; |
| ● | changes in the anticipated future size and growth rate of our market; |
| ● | general economic and market conditions; and |
| ● | other events or factors, including those resulting from war, incidents of terrorism, global pandemics or responses to these events. |
Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may also negatively impact the market price of our common stock. In addition, technology stocks have historically experienced high levels of volatility. In the past, companies who have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s attention.
We have received a deficiency notice from Nasdaq, and there can be no assurance that we will continue to be listed on Nasdaq. In the event our common stock is delisted from Nasdaq, the liquidity and market price of our common stock could decline.
Our common stock is listed on the Nasdaq Capital Market, and we must meet certain financial and liquidity criteria to maintain such listing. If we fail to meet applicable continued listing requirements of the Nasdaq Stock Market LLC (“Nasdaq”), our common stock may be delisted.
On September 3, 2024, we received a notification letter from the Listing Qualifications Department of Nasdaq notifying us that, because the closing bid price for our common stock was below $1.00 for the prior 30 consecutive business days, we no longer met the minimum bid price requirement for continued listing on the Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2), requiring a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), we have a period of 180 calendar days from September 3, 2024, or until March 3, 2025, to regain compliance with the Minimum Bid Price Requirement. If at any time before March 3, 2025, the bid price of our common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that we have achieved compliance with the Minimum Bid Price Requirement. In the event we do not regain compliance with the Minimum Bid Price Requirement by March 3, 2025, we may be eligible for additional time. To qualify for additional time, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and would need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If we meet these requirements, Nasdaq will inform us that we have been granted an additional 180 calendar days to regain compliance. However, if it appears to the staff of Nasdaq (the “Staff”) that we will not be able to cure the deficiency, or if we are otherwise not eligible, the Staff would notify us that our securities will be subject to delisting.
In order to regain compliance with the Minimum Bid Price Requirements, we may consider various measures to resolve the deficiency. There can be no assurance that any such measures will be successful or that we will not fail to meet Nasdaq’s continued listing standards in the future. A delisting of our common stock from Nasdaq may materially impair our stockholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.
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We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our capital stock, and, subject to the discretionary dividend policy described in Part II of this Report, we do not intend to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
Costs as a result of operating as a public company are significant, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
As a public company, we incur significant legal, accounting, insurance, investor relations and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devotes a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.
The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.”
We are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements is time-consuming and results in increased costs to us and could have a negative effect on our results of operations, financial condition or business.
As a public company, we are subject to the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our results of operations, financial condition or business.
General Risks
We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies and/or smaller reporting companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, as amended (“JOBS Act”). As such, we are eligible to take, have taken, and intend to take, advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.
We will remain an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we have total annual gross revenues of at least $1.235 billion, (ii) the last day of our fiscal year following the fifth anniversary of the completion of our initial public offering, (iii) the date on which we have, during the preceding three year period, issued more than $1.0 billion in non-convertible debt, or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which could occur if the market value of our common shares that are held by non-affiliates is $700 million or more as of the last business day of our most recently completed second fiscal quarter.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.
We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.
If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common stock could decline.
The market price and trading volume of our common stock may be heavily influenced by the way analysts interpret our financial information and other disclosures. We do not have control over these analysts. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price could be negatively affected. If securities or industry analysts do not publish research or reports about our business, downgrade our common stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our common stock.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Our cybersecurity risk management program is intended to protect the confidentiality, integrity, and availability of our critical IT systems, information and Intellectual Property (IP). Cybersecurity risks are among the risks evaluated and considered by, our broader enterprise risk management program, which is designed to identify, assess, prioritize and mitigate risks across the organization to enhance our resilience and support the achievement of our strategic objectives.
Our cybersecurity risk management program is led by our Director of Information Technology, who is principally responsible for managing our cybersecurity risk assessment processes, our security controls, and our detection and response to cybersecurity incidents. Our program includes protocols for preventing, detecting and responding to cybersecurity incidents, and cross-functional coordination, and planning for business continuity and disaster recovery. We rely on our information security management system supported by a set of policies based upon industry frameworks, including the NIST Cybersecurity Framework. This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Our cybersecurity risk management program includes:
| ● | Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment. |
| ● | Security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; |
| ● | The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls. |
| ● | Cybersecurity awareness training of our employees, incident response personnel, and senior management. |
| ● | Cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents. |
| ● | Third-party risk management process for service providers, suppliers, and vendors. |
| ● | We also have a cybersecurity incident response plan for the CIRT to assess and manage cybersecurity incidents, which includes escalation procedures based on the nature and severity of the incident including, where appropriate, escalation to the Board. |
As part of our overall risk mitigation strategy, we maintain insurance coverage that is intended to address certain aspects of cybersecurity risks; however, such insurance may not be sufficient in type or amount to cover us against claims related to cybersecurity breaches, cyberattacks and other related breaches.
As of the date of this report, we do not believe that any risks from cybersecurity threats, have materially affected or are reasonably likely to materially affect our Company, including our business strategy, results of operations or financial condition. Despite our security measures, however, there can be no assurance that we, or third parties with which we interact, will not experience a cybersecurity incident in the future that will materially affect us. For more information on our cybersecurity related risks, see Item IA, “Risk Factors - “Cybersecurity risk.”
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Governance
Our Board has primary responsibility for oversight of our cybersecurity and other information technology risks, including our plans to mitigate cybersecurity risks and to respond to data breaches.
The Board receives reports from our Director of Information Technology on cybersecurity matters on as needed basis. These reports can include a range of topics, including our cybersecurity risk profile, the current cybersecurity and emerging threat landscape, the status of ongoing cybersecurity initiatives, incident reports, and the results of internal and external assessments of our information systems. The Audit Committee also annually reviews the adequacy and effectiveness of our information and technology security policies and the internal controls regarding information and technology security and cybersecurity, and periodically receives updates. The Chair of the Audit Committee reports to the full Board on these discussions as appropriate.
At the management level, our Director of Information Technology who is experienced in experienced cybersecurity matters, leads our enterprise-wide cybersecurity program, and is responsible for assessing and managing our materials risks from cybersecurity threats. In performing his role, our Director of Information Technology is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity risks and incidents through the management of, and participation in, the cybersecurity risk management program and other processes described above, including the maintenance and execution of our cyber incident response plan. Our Director of Information Technology reports to our CFO/COO and to our CEO.
ITEM 2. PROPERTIES
We are based in New York, New York, with a lease expiring on December 31, 2024. We have not yet determined whether we are going to renew this lease, and if so in what capacity. If we don’t renew the current lease, we may move to an alternative location or become fully remote for the NY office.
We have a lease in Fort Worth, Texas for the operations of S5D, with a lease expiring on February 28, 2025 which we do not expect to renew. We also have a lease in Ashburn, Virginia for the operations of BLI.
We also lease two offices in Turkey, for the operations of Glimpse Turkey.
Our current facilities are leased and adequate to meet our current and ongoing needs. If we require additional space or expand geographically, we may seek additional facilities on commercially reasonable terms at such time.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may be subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Information with Respect to our Common Stock
Our common stock is traded on the Nasdaq Capital Market under the symbol “VRAR” and began trading on such exchange on July 1, 2021.
Holders of Record
As of September 27, 2024, we had 115 holders of record of our common stock based upon the records of our transfer agent, which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.
Recent Sales of Unregistered Securities
| Number of Shares | Cash Proceeds | Value of Shares | ||||||||||
| Compensation and vendor expense | 18,000 | - | $ | 21,660 | ||||||||
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None
Dividends
We have never declared or paid cash dividends on our capital stock. Although we currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, we are committed, subject to the limitations on distributions under Nevada law, to pay certain distributions in the event (i) we sell the business of any of our entities, or (ii) we report consolidated net income on our fiscal year end audited financial statements. No assurances can be made that any such milestone will be achieved or if achieved that our board of directors will approve any distribution in connection therewith.
Distribution upon sale of business. In the event we sell all or substantially all of the business of any of our entities, whether by means of a merger, asset sale, stock sale or otherwise, for a price in excess of $10,000,000, we may distribute no less than 85% of the after-tax net proceeds for such sale. However, such distribution shall be subject to a determination by our board of directors that there exist no special circumstances that would prevent it from approving such distribution or the extent thereof. Such special circumstances could include, but are not limited to, the Company or any of its underlying entities contemplating or actively being engaged in a prospective acquisition or acquisitions that may require the use of such net proceeds, or other uses integral to the operations, growth or business development of any existing underlying entity. Moreover, such distribution may be waived, in writing, by the holders of a majority of our securities holders entitled to vote, voting together as a single class.
Distribution of consolidated net income. In the event our annual audited financial statements report consolidated net income, we may distribute, within 90 days after completion of such audit, 10% of the consolidated net income for such fiscal year. However, such distribution shall be subject to a determination by our board of directors that there exist no special circumstances that would prevent it from approving such distribution or the extent thereof. Such special circumstances could include, but are not limited to, our board of directors determining that such distribution, which could have otherwise been reinvested into our existing businesses, would impair our ability to execute on our business strategy. Moreover, such distribution may be waived, in writing, by the holders of a majority of our securities holders entitled to vote, voting together as a single class.
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Subject to the distribution intentions discussed above, any future determination regarding the declaration and payment of dividends, if any, will be subject to the limitations on distributions under Nevada law, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant. In addition, our ability to pay dividends may be restricted by any agreements we may enter into in the future.
ITEM 6. [RESERVED]
Not required.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The objective of this Management’s Discussion and Analysis is to allow investors to view the Company from management’s perspective, considering items that would have a material impact on future operations. The following discussion and analysis of the results of operations and financial condition of The Glimpse Group, Inc. and its underlying entities (collectively referred to as “Glimpse” or the “Company”) as of and for the fiscal years ended June 30, 2024 and 2023, should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this Report, as well as the other financial information we file with the SEC from time to time. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we”, “our” and similar terms refer to the Company. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors. Actual results could differ materially because of factors discussed in “Risk Factors” elsewhere in this Report, and other factors that we may not know. See “Cautionary Statement Regarding Forward-Looking Information.”
Company Overview
The Glimpse Group, Inc. (“Glimpse”, the “Company”) is 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, with a development and modeling center in Turkey. 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.
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.
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 creates 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, Financial Services, Food & Hospitality, Media & Entertainment, Architecture/Engineering/Construction, Corporate Events and Presentations and Social VR support groups and therapy. 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 shifted our businesses focus (“Strategic Shift”) to providing immersive technology solutions software and services that are primarily driven by Spatial Computing, Cloud and Artificial Intelligence (“AI”), which we refer to as “Spatial Core”. While this transition is still ongoing, we believe that Spatial Core is a key differentiator, growth driver and competitive advantage for us.
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Critical Accounting Policies and Estimates and Recent Accounting Pronouncements
Basis of presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). While our significant accounting policies are more fully described in our financial statements, we believe the following accounting policies are the most critical to aid in fully understanding and evaluating this management discussion and analysis.
Principles of Consolidation
The consolidated financial statements include the balances of Glimpse and its wholly owned entities. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Accounting Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the accompanying consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
The principal estimates relate to the valuation of allowance for doubtful accounts, stock options, warrants, revenue recognition, allocation of the purchase price of assets relating to business combinations, calculation of contingent consideration for acquisitions and fair value of intangible assets and impairment of non-current assets.
Business Combinations
The results of a business acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business generally being recorded at their estimated fair values as of the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
The Company performs valuations of assets acquired and liabilities assumed and allocates the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired and liabilities assumed may require management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenues, costs and cash flows. Estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is typically one year from the acquisition date, if new information is obtained about facts and circumstances that existed as of the acquisition date, changes in the estimated values of the net assets recorded may change the amount of the purchase price allocated to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statement of operations. At times, the Company engages the assistance of valuation specialists in determining fair values of assets acquired and liabilities assumed in a business combination.
Intangible assets (other than Goodwill)
Intangible assets represent the allocation of a portion of an acquisition’s purchase price. They include acquired customer relationships and developed technology purchased. Intangible assets are stated at allocated cost less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of the related assets. The Company reviews intangibles, being amortized, for impairment when current events indicate that the fair value may be less than the carrying value.
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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, for impairment at least annually, or 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 cash flows 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 and investments within Level 1 of the fair value hierarchy on the basis of valuations based on quoted prices for the specific securities in an active market.
The Company’s contingent consideration is categorized as Level 3 within the fair value hierarchy. Contingent consideration is recorded within contingent consideration, current, and contingent consideration, non-current, in the Company’s consolidated balance sheets as of June 30, 2024 and 2023. Contingent consideration has been recorded at its fair values using unobservable inputs and have included using the Monte Carlo simulation option pricing framework, incorporating contractual terms and assumptions regarding financial forecasts, discount rates, and volatility of forecasted revenue. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.
The Company’s other financial instruments consist primarily of accounts receivable, accounts payable and other liabilities, and approximate fair value due to the short-term nature of these instruments.
Revenue Recognition
Nature of Revenues
The Company reports its revenues in two categories:
| ● | Software Services: Virtual, Augmented Reality and Spatial Computing projects, solutions and consulting services. | |
| ● | Software License and Software-as-a-Service (“SaaS”): Virtual Reality or Augmented Reality or Spatial Computing software that is sold either as a license or as a SaaS subscription. |
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The Company applies the following steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | identify the contract with a customer; | |
| ● | identify the performance obligations in the contract; | |
| ● | determine the transaction price; | |
| ● | allocate the transaction price to performance obligations in the contract; | |
| ● | recognize revenue as the performance obligation is satisfied; | |
| ● | determine that collection is reasonably assured. |
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer or service is performed and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A portion of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Other contracts can include various services and products which are at times capable of being distinct, and therefore may be accounted for as separate performance obligations.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes and other taxes are excluded from revenues.
For distinct performance obligations recognized at a point in time, any unrecognized portion of revenue and any corresponding unrecognized expenses are presented as deferred revenue/contract liability and deferred costs/contract asset, respectively, in the accompanying consolidated balance sheets. Contract assets include cash and equity based payroll costs, and may include payments to consultants and vendors.
For distinct performance obligations recognized over time, the Company records a contract asset (costs in excess of billings) when revenue is recognized prior to invoicing, or a contract liability (billings in excess of costs) when revenue is recognized subsequent to invoicing.
Significant Judgments
The Company’s contracts with customers may include promises to transfer multiple products/services. Determining whether products/services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Further, judgment may be required to determine the standalone selling price for each distinct performance obligation.
Disaggregation of Revenue
The Company generated revenue for the years ended June 30, 2024 and 2023 by delivering: (i) Software Services, consisting primarily of VR/AR/Spatial Computing software projects, solutions and consulting services, and (ii) Software Licenses & SaaS, consisting primarily of VR, AR and Spatial Computing software licenses or SaaS. The Company currently generates its revenues primarily from customers in the United States.
Revenue for a significant portion of Software Services projects and solutions (projects whereby, the development of the project leads to an identifiable asset with an alternative use to the Company) is recognized at the point of time in which the customer obtains control of the project, customer accepts delivery and confirms completion of the project. Certain other Software Services revenues are custom project solutions (projects whereby, the development of the custom project leads to an identifiable asset with no alternative use to the Company, and, in which, the Company also has an enforceable right to payment under the contract) and are therefore recognized based on the percentage of completion using an input model with a master budget. The budget is reviewed periodically and percentage of completion adjusted accordingly.
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Revenue for Software Services consulting services and website maintenance is recognized when the Company performs the services, typically on a monthly retainer basis.
Revenue for Software License is recognized at the point of time in which the Company delivers the software and customer accepts delivery. Software License 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.
Employee Stock-Based Compensation
The Company recognizes stock-based compensation expense related to grants to employees or service providers based on grant date fair values of common stock or the stock options, which are amortized over the requisite period, as well as forfeitures as they occur.
The Company values the options using the Black-Scholes Merton (“Black Scholes”) method utilizing various inputs such as expected term, expected volatility and the risk-free rate. The expected term reflects the application of the simplified method, which is the weighted average of the contractual term of the grant and the vesting period for each tranche. Expected volatility is based upon historical volatility for a rolling previous year’s trading days of the Company’s common stock. The risk-free rate is based on the implied yield of U.S. Treasury notes as of the grant date with a remaining term approximately equal to the expected life of the award.
Research and Development Costs
Research and development expenses are expensed as incurred, and include payroll, employee benefits and stock-based compensation expense. Research and development expenses also include third-party development and programming costs. Given the emerging industry and uncertain market environment the Company operates in, research and development costs are not capitalized.
Recently Adopted Accounting Pronouncements
Financial Instruments - Credit Losses
In September 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326) which requires measurement and recognition of expected credit losses for financial assets held. The Company adopted this guidance on July 1, 2023 and the impact of the adoption was not material to our consolidated financial statements as credit losses are not expected to be significant based on historical collection trends, the financial condition of payment partners, and external market factors.
Income Taxes
In December 2019, the FASB issued ASU No. 2019-12 to simplify the accounting in Accounting Standards Codification (“ASC”) 740, Income Taxes. This standard removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. The Company adopted this guidance on July 1, 2023 using the prospective transition method. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
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Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning July 1, 2025. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.
Highlights
RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2024 AND 2023
Summary P&L
| For the Years Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Revenue | $ | 8.80 | $ | 13.48 | $ | (4.68 | ) | -35 | % | |||||||
| Cost of Goods Sold | 2.94 | 4.26 | (1.32 | ) | -31 | % | ||||||||||
| Gross Profit | 5.86 | 9.22 | (3.36 | ) | -36 | % | ||||||||||
| Total Operating Expenses | 12.47 | 38.02 | (25.55 | ) | -67 | % | ||||||||||
| Loss from Operations before Other Income | (6.61 | ) | (28.80 | ) | 22.19 | 77 | % | |||||||||
| Other Income | 0.22 | 0.24 | (0.02 | ) | 8 | % | ||||||||||
| Net Loss | $ | (6.39 | ) | $ | (28.56 | ) | $ | 22.17 | 78 | % | ||||||
Revenue
| For the Years Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Software Services | $ | 8.13 | $ | 12.59 | $ | (4.46 | ) | -35 | % | |||||||
| Software License/Software as a Service | 0.67 | 0.89 | (0.22 | ) | -25 | % | ||||||||||
| Total Revenue | $ | 8.80 | $ | 13.48 | $ | (4.68 | ) | -35 | % | |||||||
Total revenue for the year ended June 30, 2024 was approximately $8.80 million compared to approximately $13.48 million for the year ended June 30, 2023, a decrease of approximately 35%. 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, multiple of our entities.
We break out our revenues into two main categories - Software Services and Software License.
| ● | Software Services revenues are primarily comprised of Immersive technology projects, services related to our software licenses and consulting retainers. | |
| ● | Software License revenues are comprised of the sale of our internally developed Immersive technology software as licenses or as software-as-a-service (“SaaS”). |
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For the year ended June 30, 2024, Software Services revenue was approximately $8.13 million compared to approximately $12.59 million for the year ended June 30, 2023, a decrease of approximately 35%. The decrease is driven by the items described above.
For the year ended June 30, 2024, Software License revenue was approximately $0.67 million compared to approximately $0.89 million for the year ended June 30, 2023, a decrease of approximately 25% driven by the divestiture of PulpoAR.
Gross Profit
| For the Years Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Revenue | $ | 8.80 | $ | 13.48 | $ | (4.68 | ) | -35 | % | |||||||
| Cost of Goods Sold | 2.94 | 4.26 | (1.32 | ) | -31 | % | ||||||||||
| Gross Profit | $ | 5.86 | $ | 9.22 | $ | (3.36 | ) | -36 | % | |||||||
| Gross Profit Margin | 67 | % | 68 | % | ||||||||||||
Gross profit was approximately 67% for the year ended June 30, 2024 compared to approximately 68% for the year ended June 30, 2023, essentially flat reflecting a consistent year over year mix in product revenue and gross profit margin.
For the years ended June 30, 2024 and 2023, internal staffing was approximately $1.90 million (65% of total cost of goods sold) and approximately $2.52 million (59% of total cost of goods sold), respectively. The increase in internal staffing as a percentage of total cost of goods sold reflects the intentional reduced reliance on subcontractors.
Operating Expenses
| For the Years Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Research and development expenses | $ | 5.45 | $ | 8.79 | $ | (3.34 | ) | -38 | % | |||||||
| General and administrative expenses | 4.29 | 5.04 | (0.75 | ) | -15 | % | ||||||||||
| Sales and marketing expenses | 2.82 | 7.49 | (4.67 | ) | -62 | % | ||||||||||
| Amortization of acquisition intangible assets | 1.24 | 2.05 | (0.81 | ) | -40 | % | ||||||||||
| Goodwill impairment | 0.38 | 12.85 | (12.47 | ) | -97 | % | ||||||||||
| Intangible asset impairment | 2.56 | 2.50 | 0.06 | 2 | % | |||||||||||
| Change in fair value of acquisition contingent consideration | (4.27 | ) | (0.70 | ) | (3.57 | ) | 510 | % | ||||||||
| Total Operating Expenses | $ | 12.47 | $ | 38.02 | $ | (25.55 | ) | -67 | % | |||||||
Operating expenses for the year ended June 30, 2024 were approximately $12.47 million compared to $38.02 million for the year ended June 30, 2023, a decrease of approximately 67%. The decrease reflects a decrease in goodwill impairment, reductions in headcount across expense categories driven by reduced revenue and an increase in the gain on change in fair value on acquisition contingent consideration.
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Research and Development
Research and development expenses (primarily representing headcount related costs) for the year ended June 30, 2024 were approximately $5.45 million compared to $8.79 million for the year ended June 30, 2023, a decrease of approximately 38%. The decrease reflects reduced headcount throughout the Company, driven by reduced revenue.
General and Administrative
General and administrative expenses (primarily representing headcount and administrative related costs) for the year ended June 30, 2024 were approximately $4.29 million compared to $5.04 million for the year ended June 30, 2023, a decrease of approximately 15%. The decrease was driven by merger and acquisition fees related to the BLI acquisition in 2023 and a reduction in headcount year over year.
Sales and Marketing
Sales and marketing expenses (primarily representing headcount, including incentive based, related costs) for the year ended June 30, 2024 were approximately $2.82 million compared to $7.49 million for the year ended June 30, 2023, a decrease of approximately 62%. The decrease reflects reduced headcount throughout the Company, driven by reduced revenue. In addition, there was a reduction in revenue based incentive expense, and furthermore, a gain (i.e., expense reduction) in stock based incentive expense due to a decrease in the fair value of the Company’s common stock between measurement periods prior to payment.
Amortization of Acquisition Intangible Assets
Amortization of acquisition intangible assets expense for the year ended June 30, 2024 was approximately $1.24 million compared to $2.05 million for the year ended June 30, 2023, a decrease of approximately 40%. The decrease is due to the write off intangible assets related to S5D in 2023 and those related to PulpoAR in the first quarter of fiscal 2024.
Goodwill Impairment
Goodwill impairment for the year ended June 30, 2024 was approximately $0.38 million compared to approximately $12.85 million in the previous year. The 2023 impairment primarily represents the write off of goodwill from the acquisition of S5D due to deteriorating revenue and operating results and forecasts. The 2024 impairment represents the write off of goodwill from the divestiture of PulpoAR, also driven by poor revenue and operating results and forecasts.
Intangible Asset Impairment
Intangible asset impairment for the year ended June 30, 2024 was approximately $2.56 million compared to approximately $2.50 million in the previous year. The 2024 impairment primarily represents the write off of BLI – customer relationships unamortized balance at June 30, 2024. This is driven by the Strategic Shift, which has resulted in a significant turnover in BLI’s customer base that existed at the acquisition date. The 2024 impairment also includes the impairment of PulpoAR – technology unamortized balance due to PulpoAR’s divestiture. The 2023 impairment primarily represents the write off of S5D – customer relationships unamortized balance at June 30, 2023, due to deteriorating revenue and forecasts. The 2023 impairment also includes the impairment of AUGGD – customer relationships and technology unamortized balances due to AUGGD’s divestiture.
Change in Fair Value of Acquisition Contingent Consideration
Change in fair value of acquisition contingent consideration for the year ended June 30, 2024 was a gain of approximately $4.27 million compared to a gain of approximately $0.70 million for the year ended June 30, 2023. The increased gain reflects a reduction in potential consideration to be paid based on reduced revenue projections and a reduction in contingent consideration that was paid in common stock due to a decrease in common stock price during the period.
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Other Income
Other income for the years ended June 30, 2024 and 2023 was approximately $0.22 million and $0.24, respectively. This represents interest income on money market fund balances.
Net loss
For the year ended June 30, 2024, we incurred a net loss of approximately $6.39 million compared to a net loss of approximately $28.57 million for the year ended June 30, 2023, an improvement of approximately 78% year-over-year. This reflects reduced revenue and associated gross profit more than offset by reductions in goodwill impairment charges, increased gain on change in fair value of acquisition contingent consideration and reductions in operating expenses primarily due to a decrease in headcount driven by reduced revenue.
Non-GAAP Financial Measures
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 stockholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods.
Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.
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.
We have included a reconciliation of our financial measures calculated in accordance with GAAP to the most comparable non-GAAP financial measures. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules.
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The following table presents a reconciliation of net loss to Adjusted EBITDA loss for the years ended June 30, 2024 and 2023:
| For the Years Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| (in millions) | ||||||||
| Net loss | $ | (6.39 | ) | $ | (28.56 | ) | ||
| Depreciation and amortization | 1.36 | 2.19 | ||||||
| EBITDA loss | (5.03 | ) | (26.37 | ) | ||||
| Stock based compensation expenses | 2.28 | 4.98 | ||||||
| Change in fair value of acquisition contingent consideration | (4.27 | ) | (0.70 | ) | ||||
| Intangible asset impairment | 2.94 | 15.35 | ||||||
| Change in fair value of accrued performance bonus | (0.55 | ) | - | |||||
| Acquisition related expenses | - | 0.28 | ||||||
| Adjusted EBITDA loss | $ | (4.63 | ) | $ | (6.46 | ) | ||
Adjusted EBITDA loss for the year ended June 30, 2024 was $4.63 million compared to $6.46 million for the comparable 2023 period. The improvement in EBITDA loss was driven by reductions in cash operating expenses exceeding reduced revenue/gross profit.
Going Concern
The Company evaluated whether there are conditions and events, considered in the aggregate, that raise doubt about its ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.
The Company has incurred recurring losses since its inception, including a net loss of $6.39 million for the year ended June 30, 2024. In addition, as of June 30, 2024, the Company had an accumulated deficit of $63.0 million. While the Company’s cash flow has improved in recent months, we may continue to generate negative cash flow for the foreseeable future. While the Company intends to generate positive cash flow in the coming 12 months, its cash and cash equivalents as of June 30, 2024 may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements. We will need to generate significant additional revenue to achieve and sustain profitability, and we cannot assure that we will be able to do so. Accordingly, the Company has concluded that 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 consolidated financial statements.
Outside of potential revenue growth generated by the Company, in order to restore 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.
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.
Potential liquidity resources
Potential liquidity resources may include the sale of common stock pursuant to an existing effective registration statement on Form S-3. Such financing may not be available on terms favorable to the Company, or at all.
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Liquidity and Capital Resources
| For the Years Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Net cash used in operating activities | $ | (5.21 | ) | $ | (9.16 | ) | $ | 3.95 | 43 | % | ||||||
| Net cash used in investing activities | (1.53 | ) | (3.53 | ) | 2.00 | 57 | % | |||||||||
| Net cash provided by financing activities | 2.97 | 0.06 | 2.91 | NM | ||||||||||||
| Decrease in cash, cash equivalents and restricted cash | (3.77 | ) | (12.63 | ) | 8.86 | -70 | % | |||||||||
| Cash, cash equivalents and restricted cash, beginning of year | 5.62 | 18.25 | (12.63 | ) | -69 | % | ||||||||||
| Cash and cash equivalents, end of year | $ | 1.85 | $ | 5.62 | $ | (3.77 | ) | -67 | % | |||||||
Operating activities
Net cash used in operating activities for the year ended June 30, 2024 was approximately $5.21 million, compared to approximately $9.16 million for the year ended June 30, 2023. This is driven by the decrease in revenue and related gross profit more than offset by reductions in cash operating expenses.
Investing activities
Net cash used in investing activities for the year ended June 30, 2024 was approximately $1.53 million compared to approximately $3.53 million for the year ended June 30, 2023. 2024 primarily represented a contingent consideration payment for the BLI acquisition based on achieved revenue milestone. 2023 represented the initial BLI acquisition payment at closing and a contingent acquisition consideration payment to S5D.
Financing activities
Cash flow provided from financing activities during the year ended June 30, 2024 was approximately $2.97 million, compared to $0.06 million for the prior period. 2024 represents the net proceeds of the common stock purchase agreement in October 2023.
Capital Resources
As of June 30, 2024, the Company had cash and cash equivalents of $1.85 million, plus $0.72 million of accounts receivable.
As of June 30, 2024, the Company had no outstanding debt obligations.
As of June 30, 2024, the Company had no issued and outstanding preferred stock.
As of June 30, 2024, contingent consideration for acquisition liabilities contains cash components ranging up to $3.0 million, potentially payable through October 2025 contingent on BLI achieving certain revenue milestones.
Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company,” as defined in the JOBS Act. As such, we are eligible to take, have taken, and intend to take, advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of at least $1.235 billion, (ii) the last day of our fiscal year following the fifth anniversary of the completion of our initial public offering, (iii) the date on which we have, during the preceding three year period, issued more than $1.0 billion in non-convertible debt, or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which could occur if the market value of our common shares that are held by non-affiliates is $700 million or more as of the last business day of our most recently completed second fiscal quarter.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.
We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our common stock less attractive, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
All financial information required by this Item is attached hereto at the end of this Report beginning on page F-1 and is hereby incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As reported in the Current Report on Form 8-K filed by the Company with the SEC on December 21, 2023, Hoberman & Lesser, CPAs LLP (“Hoberman”) resigned as independent registered public accounting firm of the Company effective as of December 20, 2023.
During the fiscal year ended June 30, 2023 and 2022, and the subsequent interim period through December 20, 2023, there were no (i) disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Hoberman on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Hoberman, would have caused it to make reference to the subject matter of such disagreements in connection with its reports on the Company’s financial statements for such periods, or (ii) reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).
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ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2024.
In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, we are required to apply judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that assessment, our management concluded that our internal control over financial reporting was effective as of June 30, 2024 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with GAAP.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2024, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information for our executive officers and directors, their ages (as of September 25, 2024) and position(s) with the Company.
| Name | Age | Position | |||
| Executive Officers | |||||
| Lyron Bentovim | 55 | President, Chief Executive Officer, Director and Chairman of the Board | |||
| Maydan Rothblum | 51 | Chief Financial Officer, Chief Operating Officer, Secretary and Director | |||
| David J. Smith | 48 | Chief Creative Officer | |||
| Tyler Gates | 38 | Chief Futurist Officer | |||
| Non-Executive Directors | |||||
| Ian Charles | 56 | Independent Director | |||
| Jeff Enslin | 57 | Independent Director | |||
| Lemuel Amen | 58 | Independent Director | |||
| Alexander Ruckdaeschel | 52 | Independent Director | |||
| Tamar Elkeles | 55 | Independent Director | |||
Directors are elected and hold office until the next annual meeting of the stockholders of the Company and until their successors are elected. Officers are elected and serve at the discretion of the Board of Directors.
Executive Officers
Lyron Bentovim has been our President and Chief Executive Officer, and the Chairman and a member of our board of directors since he co-founded the Company in 2016. From July 2014 to August 2015, Mr. Bentovim was Chief Operating Officer and Chief Financial Officer of Top Image Systems, a Nasdaq-listed company. From March 2013 to July 2014, Mr. Bentovim served as Chief Operating Officer and Chief Financial Officer of NIT Health and Chief Operating Officer and Chief Financial Officer and Managing Director at Cabrillo Advisors. From August 2009 until July 2012, Mr. Bentovim served as the Chief Operating Officer and Chief Financial Officer of Sunrise Telecom, Inc. a Nasdaq-listed company. Prior to Sunrise Telecom, Inc., from January 2002 to July 2009, Mr. Bentovim was a Portfolio Manager for Skiritai Capital LLC, an investment advisor. Prior to Skiritai Capital LLC, Mr. Bentovim served as the President, Chief Operating Officer and co-founder of WebBrix, Inc. Mr. Bentovim serves on the board of directors of Manhattan Bridge Capital, a Nasdaq-listed company, and has served on the board of directors of the following publicly traded companies: Blue Sphere, RTW Inc., Ault, Inc., Top Image Systems Ltd., Three-Five Systems Inc., Sunrise Telecom Inc., and Argonaut Technologies Inc. Additionally, Mr. Bentovim was a Senior Engagement Manager with strategy consultancies USWeb/CKS, Mitchell Madison Group LLC and McKinsey & Company Inc. Mr. Bentovim has an MBA from Yale School of Management and a law degree from the Hebrew University, Israel.
We concluded that Mr. Bentovim should serve as a member of our board of directors based on his position as President and Chief Executive Officer of the Company, and our review of his experience, qualifications, attributes and skills, including co-founding our company and his executive leadership experience.
Maydan Rothblum has been Chief Operating Officer and Chief Financial Officer since he co-founded the Company in 2016 and a member of our board of directors since July 2021. From 2004 to 2016, Mr. Rothblum served as the co-founder, Managing Director and Chief Operating Officer of Sigma Capital Partners, a middle-market private equity firm focused on making negotiated investments directly onto the balance sheets of, primarily, small-to-mid sized publicly traded technology companies. In addition to his role as principal investor, Mr. Rothblum oversaw the fund’s portfolio, managed the fund’s day-to-day operations and financial reporting. Prior to working at Sigma Capital Partners, Mr. Rothblum held positions at Apax Partners, a global private equity fund, and Booz, Allen & Hamilton, a global strategic consultancy. Additionally, Mr. Rothblum served as an Engineer for the Israel Defense Forces. Mr. Rothblum holds an MBA from Columbia Business School and a BS in Industrial Engineering and Management from the Technion - Israel Institute of Technology.
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We concluded that Mr. Rothblum should serve as a member of our board of directors based on is based on his position as Chief Financial Officer and Chief Operating Officer of the Company, and our review of his experience, qualifications, attributes and skills, including co-founding our Company, his executive leadership experience and his experience in the finance industry.
David J. Smith has been the Chief Creative Officer since he co-founded the Company in 2016, and was a member of our board of directors from the Company’s inception until December 2023. Since June 2016, Mr. Smith has served as the co-founder and Organizer of NYVR Meetup. Prior to co-founding the Company, Mr. Smith served as the Senior Project Manager at Avison Young, where he managed construction and real estate development projects. From April 2016 to August 2020, Mr. Smith was the Founder of VRTech Consulting LLC, which provided consulting for real estate development projects and virtual reality. Mr. Smith holds a B.S. in Civil Engineering from Pennsylvania State University.
Tyler Gates has been the General Manager of Brightline Interactive, LLC (BLI) since August 1, 2022 and the Company’s Chief Futurist Officer since August 1, 2022. Mr. Gates is also a non-voting board observer of our board of directors. Prior to the closing of our acquisition of BLI, Mr. Gates was the Chief Executive Officer of BLI, and has been with BLI in several executive leadership roles since 2012. Additionally, Mr. Gates served as the founding and former President of the VR/AR Association (VRARA) Washington DC’s Chapter and was the former host of the VRARA Podcast. Mr. Gates holds a BA Degree in Corporate Communications and Interpersonal Psychology from Lenoir-Rhyne University.
Directors
Information regarding our executive officers who also serve as members of our board of directors are set forth in “—Executive Officers” above.
The biographical description of each director below includes the specific experience, qualifications, attributes and skills that our board of directors considered in making a conclusion as to whether such person should serve as a member of our board.
Ian Charles has served as a member of our board of directors since January 2022. Mr. Charles has approximately 25 years of executive leadership experience in technology, public markets, mergers and acquisitions, and multinational operations. Since 2022, Mr. Charles has served as the Chief Financial Officer of Filevine, a provider of legal SaaS solutions. From 2019 to 2021, Mr. Charles served as the Chief Financial Officer of Scoop Technologies, Inc., a workplace management software provider. From 2014 to 2019, Mr. Charles served as the Chief Financial Officer of Planful (formerly Host Analytics), a financial planning and analysis platform that provides financial planning, consolidation, reporting and analytics.
Jeff Enslin has served as a member our board of directors since July 2018. From 1995 to 2018, Mr. Enslin was a senior partner and senior portfolio manager at Caxton Associates LP, a macro-focused hedge fund. Mr. Enslin is the founder and managing member of Perimetre Capital LLC since 2018, where he actively manages a wide portfolio of early stage technology investments. Mr. Enslin has served on the Investment Committees at Lehigh University (2010 to 2019) and the Peddie School (2010 to present, Advisory Trustee). Mr. Enslin is an active mentor at both Creative Destruction Labs and Endless Frontier Labs. Mr. Enslin received his MBA in finance and international business from New York University’s Stern School of Business and his B.S. in Finance from Lehigh University.
Lemuel Amen has served as a member of our board of directors since May 2021. Mr. Amen is the Founder and Chairman of Altius Manufacturing Group, LLC, an equity growth management firm, and has held senior executive positions and led global business units for Electronic Data Systems and 3M. Mr. Amen has served on the board of directors for a privately held technology firm, AbeTech Inc., since 2009, and on the board of advisors of a privately held industrial firm, Diversified Chemical Technology, Inc., since 2018. Additionally, Mr. Amen is an experienced board governance professional serving high-growth technology, industrial services, and application software firms. Prior board governance service positions include: Chairman of the board of directors for Viking Engineering and Development Inc. (2011 to 2017); board director and operating committee member for Bauer Welding & Metal Fabricators, Inc. (2013 to 2016); and board President and lead director for HighJump Software, Inc. (2005 to 2008). Mr. Amen served as Chairman for the Federal Reserve Bank of Minneapolis, Ninth District Advisory Council from 2012 to 2015. Additional governance and board director service post includes: University of Michigan - Dearborn, College of Business, Board of Advisors (2019 to present); State of Minnesota Governor’s Workforce Development Council (2016 to 2019); Ordway Center for the Performing Arts (2015 to 2018); Junior Achievement Worldwide Inc., Global Board of Directors (2003 to 2008); and Northwestern University, McCormick School of Engineering & Computer Science, Industrial Advisory Board (2000 to 2006). Mr. Amen earned his M.S. in Civil and Environmental Engineering from Northwestern University, and his B.S. in Mechanical Engineering at California State University-Northridge.
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Alexander Ruckdaeschel has served as a member of our board of directors since July 2021. Mr. Ruckdaeschel has worked in the financial industry for over 20 years in the United States and Europe as a co-founder, partner and senior executive. Since 2012 to June 2021, he served on the board of directors of Vuzix (Nasdaq: VUZI), a leading supplier of smart glasses and AR technology products and services and was the Chairman of Vuzix’s compensation committee. Mr. Ruckdaeschel co-founded Herakles Capital Management and AMK Capital Advisors in 2008. He was also a partner with Alpha Plus Advisors and Nanostart AG, where he was the head of their U.S. group. Mr. Ruckdaeschel has significant experience in startup operations as the manager of DAC Nanotech-Fund and Biotech-Fund, and sits on several boards. Following service in the German military, Mr. Ruckdaeschel was a research assistant at Dunmore Management focusing on intrinsic value and identifying firms that were undervalued and had global scale potential.
Tamar Elkeles has served as a member of our board of directors since April 2024. Dr. Elkeles has nearly 30 years of experience in the high technology industry. She was the Chief Learning Officer at Qualcomm from 1992 to 2015. Afterward, she served in senior executive positions at several technology companies and investment firms. Dr. Elkeles recently served on the board of directors of GP Strategies Corporation, an NYSE-listed company until its sale to Learning Technologies Group, a London Stock Exchange company. She currently serves on the Board of Directors of OpenSesame and on the Board of Advisors of the Forbes School of Business & Technology at The University of Arizona. Dr. Elkeles also serves as a strategic advisor to several start-up companies in the technology sector. She holds both an M.S. and Ph.D. in Organizational Psychology.
Family Relationships
No family relationships exist among any of our executive officers or directors.
Committees of Our Board of Directors
Our board of directors has established four standing committees: an audit committee, a compensation committee, a nominating and corporate governance committee, and a strategy committee. The composition and responsibilities of each of the committees of our board of directors are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.
Audit Committee
Our audit committee consists of Ian Charles, Lemuel Amen and Jeff Enslin. The Chair of our audit committee is Ian Charles. Our board of directors has determined that each member of the audit committee (i) is “independent” as that term is defined in Nasdaq rules, (ii) meets the heightened independence requirements for audit committee members required under the Exchange Act and related SEC and Nasdaq rules, (iii) has sufficient knowledge in financial and auditing matters to serve on the audit committee, and (iv) can read and understand fundamental financial statements in accordance with applicable requirements. In addition, our board of directors has determined that Ian Charles is an “audit committee financial expert” within the meaning of SEC regulations. In arriving at these determinations, our board of directors has examined each audit committee member’s scope of experience and the nature of their employment.
Our audit committee has a written charter. Our audit committee reviews and reassesses the adequacy of the written charter on an annual basis.
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The primary purpose of our audit committee is to provide assistance to the board of directors in fulfilling its oversight responsibility to our stockholders and others relating to (i) the integrity of the Company’s financial statements, (ii) the effectiveness of the Company’s internal control over financial reporting, (iii) the Company’s compliance with legal and regulatory requirements, and (iv) the independent auditor’s qualifications and independence. Specific responsibilities of our audit committee include:
| ● | Reviewing and reassessing the charter at least annually and obtaining the approval of the board of directors; | |
| ● | Reviewing and discussing quarterly and annual financial statements; | |
| ● | Discussing the Company’s policies on risk assessment and risk management; | |
| ● | Discussing with the independent auditor the overall scope and plans for their audit, including the adequacy of staffing and budget or compensation; and | |
| ● | Reviewing and approving related party transactions. |
Compensation Committee
Our Compensation Committee consists of Alexander Ruckdaeschel, Lemuel Amen and Jeff Enslin. The Chair of our Compensation Committee is Alexander Ruckdaeschel. The Board has affirmatively determined that each member of the Compensation Committee meets the additional independence criteria applicable to compensation committee members under Nasdaq and SEC rules.
Our compensation committee has a written charter. Our compensation committee reviews and reassesses the adequacy of the written charter on an annual basis.
The primary purpose of our compensation committee is to discharge the responsibilities of our board of directors with respect to all forms of compensation for the Company’s executive officers and to administer the Company’s equity incentive plan for employees. Specific responsibilities of our compensation committee include:
| ● | Reviewing and overseeing the Company’s overall compensation philosophy, and overseeing the development and implementation of compensation programs aligned with the Company’s business strategy; | |
| ● | Determining the form and amount of compensation to be paid or awarded to the Chief Executive Officer and all other executive officers of the Company; | |
| ● | Annually reviewing and approving all matters related to Chief Executive Officer compensation; | |
| ● | Reviewing, adopting, amending, and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections, and any other compensatory arrangements for our executive officers and other senior management; and | |
| ● | Reviewing and establishing general policies relating to compensation and benefits of our employees, including our overall compensation philosophy. |
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Nominating and Corporate Governance Committee
The members of our nominating and corporate governance committee are Jeff Enslin, Alexander Ruckdaeschel and Ian Charles. Jeff Enslin serves as the Chairperson of the committee. Our nominating and corporate governance committee has a written charter. Our nominating and corporate governance committee reviews and reassesses the adequacy of the written charter on an annual basis. Our nominating and corporate governance committee’s responsibilities include:
| ● | identifying individuals qualified to become board members; | |
| ● | recommending to our board of directors the persons to be nominated for election or appointed as directors and to each board committee; | |
| ● | reviewing and recommending to our board of directors corporate governance principles, procedures and practices, and reviewing and recommending to our board of directors proposed changes to our corporate governance principles, procedures and practices from time to time; and | |
| ● | reviewing and making recommendations to our board of directors with respect to the composition, size and needs of our board of directors. |
Strategy Committee
The members of our strategy committee are Lemuel Amen, Alexander Ruckdaeschel, Jeff Enslin, Tamar Elkeles and Lyron Bentovim. Lem Amen serves as the Chairperson of the strategy committee. The strategy committee’s responsibilities include:
| ● | identifying strategic trends within the Company and industry; | |
| ● | analyzing the potential strategic impact of various financial, operational, technological and M&A alternatives; and | |
| ● | reviewing and making recommendations to our board of directors with respect to the Company’s strategic directions. |
Code of Ethics
We have adopted a written code of ethics and business conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The code is updated periodically. While we make ministerial and technical amendments to the code from time to time, if we make any substantive amendments to, or grant any waivers from, the code for any officer or director, we will disclose the nature of such amendment or waiver in a current report on Form 8-K.
Director or Officer Involvement in Certain Legal Proceedings
To our knowledge, after reasonable inquiry, there are no events or involvements in legal proceedings requiring disclosure pursuant to Item 401(f) of Regulation S-K.
Section 16(a) Compliance
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than ten-percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms furnished to us and the written representations from certain of the reporting persons that no other reports were required during the year ended June 30, 2024, all executive officers, directors and greater than ten-percent beneficial owners complied with the reporting requirements of Section 16(a)].
Insider Trading Policy
We
have
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ITEM 11. EXECUTIVE COMPENSATION
This section discusses the material components of our executive compensation program for our executive officers who are named in the “Summary Compensation Table” below. For the fiscal year ended June 30, 2024, our “named executive officers” and their positions were as follows:
| ● | Lyron Bentovim, President and Chief Executive Officer; | |
| ● | Maydan Rothblum, Chief Financial Officer and Chief Operating Officer; | |
| ● | David J. Smith, Chief Creative Officer. |
SUMMARY COMPENSATION TABLE
The following table represents information regarding the total compensation awarded to, earned by or paid to our named executive officers during the fiscal years ended June 30, 2024 and 2023:
| Name and Principal Position | Fiscal Year | Salary | Stock Awards ($) | Option Award* | All Other Compensation | Total | ||||||||||||||||||
| Lyron Bentovim | 2024 | $ | 265,000 | - | $ | 69,638 | $ | - | $ | 334,638 | ||||||||||||||
| President & CEO | 2023 | $ | 231,875 | 51,255 | $ | 460,810 | $ | 331 | $ | 744,271 | ||||||||||||||
| Maydan Rothblum | 2024 | $ | 235,000 | - | $ | 357,746 | $ | - | $ | 592,746 | ||||||||||||||
| CFO & COO | 2023 | $ | 211,500 | 36,360 | $ | 293,243 | $ | 4,622 | $ | 545,725 | ||||||||||||||
| David J Smith | 2024 | $ | 210,000 | - | $ | 49,686 | $ | - | $ | 259,686 | ||||||||||||||
| CCO | 2023 | $ | 189,000 | - | $ | 101,418 | $ | 1,120 | $ | 291,538 | ||||||||||||||
* FY ‘24 stock option award primarily in lieu of cancelation of previously issued and fully vested stock options
| (1) | In addition to serving as our President and Chief Executive Officer, Mr. Bentovim serves as the Chairman and a member of our board of directors but receives no additional compensation for his service on our board. | |
| (2) | In addition to serving as our Chief Financial Officer and Chief Operating Officer, Mr. Rothblum serves as a member of our board of directors but receives no additional compensation for his service on our board. | |
| (3) | In addition to serving as our Chief Creative Officer, Mr. Smith served as a member of our board of directors until December 15, 2023 but received no additional compensation for such service on our board. |
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Employment Agreements
Lyron Bentovim
We have entered into an executive employment agreement with Lyron Bentovim, which employment agreement shall continue until terminated by either us or Mr. Bentovim. Pursuant to Mr. Bentovim’s employment agreement, he receives an annual base cash salary of $265,000. In addition, Mr. Bentovim is eligible to receive performance bonuses as determined by our compensation committee.
Maydan Rothblum
We have entered into an executive employment agreement with Maydan Rothblum, which employment agreement shall continue until terminated by either us or Mr. Rothblum. Pursuant to Mr. Rothblum’s employment agreement, he receives an annual cash base salary of $235,000. In addition, Mr. Rothblum is eligible to receive performance bonuses as determined by our compensation committee.
David J. Smith
We have entered into an executive employment agreement with David J. Smith, which employment agreement shall continue until terminated by either us or Mr. Smith. Pursuant to Mr. Smith’s employment agreement, he receives an annual cash base salary of $210,000. In addition, Mr. Smith is eligible to receive performance bonuses as determined by our Compensation Committee.
Equity Incentive Plan
In October 2016, our stockholders approved our Equity Incentive Plan, as amended (the “Plan”), which is administered by our compensation committee. Pursuant to the Plan, we are authorized to grant options and other equity awards to employees of the Company, non-employee directors or key consultants to the Company and any person who has been offered employment by the Company, provided that such prospective employee may not receive any payment or exercise any right relating to an award until such person has commenced employment with the Company (the “Eligible Persons”). The purchase price of each share of common stock purchasable under an award issued pursuant to the Plan, shall be determined by our compensation committee, in its sole discretion, at the time of grant, but shall not be less than 100% of the fair market of such share of common stock on the date the award is granted, subject to adjustment. Our compensation committee also has sole authority to set the terms of all awards at the time of grant.
Pursuant to the Plan, a maximum of 10,000,000 shares of our common stock shall be set aside and reserved for issuance. In addition, subject to adjustment as provided in the Plan, the share reserve will automatically increase on January 1 of each calendar year until (and including) January 1, 2030 (each, an “Evergreen Date”) in an amount equal to 5% of the total number of shares of our common stock outstanding on the December 31st immediately preceding the applicable Evergreen Date (the “Evergreen Increase”). Notwithstanding the foregoing, our board of directors may act prior to the Evergreen Date of a given year to provide that there will be no Evergreen Increase for such year, or that the Evergreen Increase for such year will be a lesser number of shares of our common stock than would otherwise occur pursuant to the preceding sentence. Any common stock delivered under the Plan shall consist of authorized and unissued shares or treasury shares. Pursuant to these provisions, effective January 1, 2024 the number of shares of our common stock set aside for the Plan automatically increased to a total of approximately 12.2 million.
Under the Plan, an Eligible Person may be granted options, stock appreciation rights, restricted stock, phantom stock, sale phantom stock, stock granted as a bonus, a performance award, other stock-based awards or an annual incentive award, together with any related right or interest.
The term of each award under the Plan shall be for such period as may be determined by our compensation committee, subject to the express limitations set forth in the Plan.
Unless earlier terminated by our board of directors, the Plan will remain in effect until such time as no shares of common stock remain available for delivery under the Plan and the Company has no further rights or obligations under the Plan with respect to outstanding awards under the Plan.
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Outstanding Equity Awards at Fiscal Year-End
The following table discloses information regarding outstanding equity awards granted or accrued as of June 30, 2024, for our named executive officers.
| Outstanding Equity Awards | ||||||||||||||||
| Option Awards | ||||||||||||||||
| Number of | Number of | |||||||||||||||
| Securities | Securities | |||||||||||||||
| Underlying | Underlying | |||||||||||||||
| Unexercised | Unexercised | Option | Option | |||||||||||||
| Options (#) | Options (#) | Exercise | Expiration | |||||||||||||
| Name | Exercisable | Unexercisable | Price | Date | ||||||||||||
| Lyron Bentovim | 30,250 | 90,750 | $ | 7.00 | 2/15/2033 | |||||||||||
| - | 24,051 | $ | 3.00 | 3/1/2031 | ||||||||||||
| - | 24,051 | $ | 2.50 | 3/1/2031 | ||||||||||||
| - | 24,051 | $ | 2.00 | 3/1/2031 | ||||||||||||
| - | 1,089,000 | $ | 7.00 | 2/15/2033 | ||||||||||||
| Maydan Rothblum | 3,805 | - | $ | 7.00 | 2/15/2033 | |||||||||||
| 15,445 | 57,750 | $ | 7.00 | 2/15/2033 | ||||||||||||
| 16,302 | 233,698 | $ | 1.50 | 3/1/2034 | ||||||||||||
| - | 729 | $ | 3.00 | 3/1/2031 | ||||||||||||
| - | 17,986 | $ | 3.00 | 3/1/2031 | ||||||||||||
| - | 875 | $ | 2.50 | 3/1/2031 | ||||||||||||
| - | 17,840 | $ | 2.50 | 3/1/2031 | ||||||||||||
| - | 1,094 | $ | 2.00 | 3/1/2031 | ||||||||||||
| - | 17,621 | $ | 2.00 | 3/1/2031 | ||||||||||||
| - | 693,000 | $ | 7.00 | 2/15/2033 | ||||||||||||
| D.J. Smith | 5,500 | 16,500 | $ | 7.00 | 2/15/2033 | |||||||||||
| - | 17,160 | $ | 3.00 | 3/1/2031 | ||||||||||||
| - | 17,160 | $ | 2.50 | 3/1/2031 | ||||||||||||
| - | 17,160 | $ | 2.00 | 3/1/2031 | ||||||||||||
| - | 198,000 | $ | 7.00 | 2/15/2033 | ||||||||||||
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DIRECTOR COMPENSATION
Because we are still in the development stage, our directors do not receive any cash compensation other than reimbursement for expenses incurred during the performance of their duties or their separate duties as officers of the Company.
The following table sets forth information concerning equity-based compensation for the fiscal year ending June 30, 2024 of our directors serving at such time who are not also named executive officers.
| Name | Fiscal Year | Options Granted (1) | Stock Awards ($) | Total ($) | ||||||||||||
| Jeffrey Enslin* | 2024 | $ | - | $ | 340,352 | $ | 340,352 | |||||||||
| Lemuel Amen* | 2024 | $ | - | $ | 65,064 | $ | 65,064 | |||||||||
| Alexander Ruckdaeschel* | 2024 | $ | - | $ | 59,011 | $ | 59,011 | |||||||||
| Ian Charles ** | 2024 | $ | 61,279 | $ | - | $ | 61,279 | |||||||||
| Tamar Elkeles | 2024 | $ | 21,333 | $ | - | $ | 40,853 | |||||||||
* Common shares issued in lieu of the cancelation of previously issued and fully vested stock options, and Board compensation for the fiscal year
** Includes stock options issued in lieu of the cancelation of previously issued and fully vested stock options, and Board compensation for the fiscal year
| (1) | The amounts disclosed represent the approximate aggregate grant date fair value of stock options granted to our directors during fiscal year ended June 30, 2024 under the Plan. The assumptions used to compute the fair value are disclosed in Note 9 to our audited financial statements included in this Report. Such grant date fair values do not take into account any estimated forfeitures related to service-vesting conditions. These amounts do not reflect the actual economic value that will be realized by the named director upon the vesting of the stock options, the exercise of the stock options, or the sale of common stock acquired under such stock options. | |
| (2) | As June 30, 2024, Mr. Enslin held options to purchase 0 shares of our common stock. | |
| (3) | As June 30, 2024, Mr. Amen held options to purchase 0 shares of our common stock. | |
| (4) | As June 30, 2024, Mr. Ruckdaeschel held options to purchase 0 shares of our common stock. | |
| (5) | As June 30, 2024, Mr. Charles held options to purchase 32.475 shares of our common stock. | |
| (6) | Tamar Elkeles was appointed to our board of directors, effective April 29, 2024. As June 30, 2024, Dr. Elkeles held options to purchase 5,000 shares of our common stock. | |
| (7) | Sharon Rowlands resigned as a member of our board of directors, effective December 15, 2023. As June 30, 2024, Ms. Rowlands held options to purchase 148,517 shares of our common stock. |
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Risk Management
The Company does not believe risks arising from its compensation policies and practices for its employees are reasonably likely to have a material adverse effect on the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as otherwise indicated below, the following table sets forth certain information regarding beneficial ownership of our common stock as of September 27, 2024 by:
| ● | Each of our current directors; | |
| ● | each of our named executive officers; | |
| ● | each person or group of affiliated persons known to us to be the beneficial owner of more than 5% of our common stock; and | |
| ● | all of our directors and executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to the securities. Common stock issuable upon the exercise, conversion or settlement of options, warrants, restricted stock units or other rights to acquire common stock that are currently exercisable, convertible or subject to settlement, or exercisable, convertible or subject to settlement within 60 days of September 30, 2024 are deemed to be outstanding and beneficially owned by the holder for the purpose of computing share and percentage ownership of that holder, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to the table below, and subject to community property laws where applicable, we believe the persons and entities named in the table below have sole voting and investment power with respect to all common stock shown as beneficially owned by them. Unless otherwise indicated, the address of each of the individuals and entities named below is c/o The Glimpse Group, Inc., 15 West 38th St., 12th Floor, New York, NY 10018. The percentage of shares beneficially owned is computed on the basis of 18,166,217 shares of common stock outstanding as of September 27, 2024.
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| Name of Beneficial Owner | Common Stock Beneficially Owned | Percentage of Common Stock Owned | ||||||
| Directors and Officers: | ||||||||
| Lyron L. Bentovim | ||||||||
| President, Chief Executive Officer and Chairman of the Board | 1,084,167 | (1) | 5.96 | % | ||||
| Maydan Rothblum | ||||||||
| Chief Operating Officer, Chief Financial | ||||||||
| Officer, Secretary and Treasurer | 532,870 | (2) | 2.93 | % | ||||
| D.J. Smith | ||||||||
| Chief Creative Officer and Director | 1,008,048 | (3) | 5.55 | % | ||||
| Jeff Enslin | ||||||||
| Director and Chair of Audit Committee | 335,405 | (4) | 1.85 | % | ||||
| Lemuel Amen | ||||||||
| Director | 148,122 | (5) | 0.82 | % | ||||
| Alexander Ruckdaeschel | ||||||||
| Director | 48,889 | (6) | 0.27 | % | ||||
| Ian Charles | ||||||||
| Director and Chair of Audit Committee | 36,475 | (7) | 0.20 | % | ||||
| Tamar Elkeles | ||||||||
| Director | 10,000 | (8) | 0.06 | % | ||||
| All officers and directors | 3,958,672 | 21.47 | % | |||||
| Beneficial owners of more than 5% | ||||||||
| VRTech Consulting LLC | 1,002,298 | (9) | 5.52 | % | ||||
| Darklight Partners LLC | 1,001,945 | (10) | 5.52 | % | ||||
(1) Includes: 1,053,916 shares of common stock, of which 1,001,945 shares are owned by Darklight Partners LLC (an entity owned and managed by Mr. Bentovim) and fully vested options to purchase 30,250 shares of common stock.
(2) Includes: 486,450 shares of common stock, 35,552 fully vested options and 10,868 options that vest within 60 days An additional 3,528 shares of common stock are held by Mr. Rothblum’s mother.
(3) Includes: 1,002,298 shares of common stock owned by VRTech Consulting LLC (an entity owned and managed by Mr. Smith) and fully vested options to purchase 5,500 shares of common stock.
(4) Includes: 332,405 shares of common stock owned by Perimetre Capital, LLC (an entity owned and managed by Mr. Enslin).
(5) Represents 148,405 shares of common stock
(6) Represents 48,889 shares of common stock
(7) Represents 32,475 fully vested options and 4,000 options that vest within 60 days
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(8) Represents 5,000 fully vested options and 5,000 options that vest within 60 days.
(9) VRTech Consulting LLC is an entity owned and managed by Mr. Smith, our Chief Creative Officer.
(10) Darklight Partners LLC is an entity owned and managed by Mr. Bentovim, our President, Chief Executive Officer and Chairman.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
None.
Director Independence
Our board of directors evaluates the independence of each member of our board of directors in accordance with the listing rules of Nasdaq (the “Nasdaq Listing Rules”). Pursuant to these rules, a majority of our board of directors must be “independent directors” within the meaning of the Nasdaq Listing Rules, and all directors who sit on our audit committee, nominating and corporate governance committee and compensation committee must also be independent directors.
The Nasdaq definition of “independence” includes a series of objective tests, such as the director or director nominee is not, and was not during the last three years, an employee of the Company or our entities and has not received certain payments from, or engaged in various types of business dealings with us. In addition, as further required by the Nasdaq Listing Rules, our board of directors has made a subjective determination as to each independent director that no relationships exist, which, in the opinion of our board, would interfere with such individual’s exercise of independent judgment in carrying out his or her responsibilities as a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors with regard to each director’s business and personal activities as they may relate to the Company and its management.
As a result, our board of directors has affirmatively determined that each of Ian Charles, Lemuel Amen, Alexander Ruckdaeschel, Tamar Elkeles and Jeff Enslin, is (and during her service on our board, Sharon Rowlands was) independent in accordance with the Nasdaq Listing Rules. Our board of directors has also affirmatively determined that each member of our audit committee, nominating and corporate governance committee and compensation committee is (and during her service on a committee of our board, Ms. Rowlands was) an independent director.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The following is a summary of the fees billed or expected to be billed to us for professional services rendered with respect to the fiscal years ended June 30, 2024 and 2023:
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Audit fees | $ | 108,000 | $ | 158,000 | ||||
| Audit fees - benefit plan | 20,000 | - | ||||||
| Tax fees | 13,000 | - | ||||||
| Other fees | - | 9,000 | ||||||
| Total Fees | $ | 141,000 | $ | 167,000 | ||||
“Audit Fees” represent fees for respective fiscal year audits, including the review of our quarterly financial statements.
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Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Our board of directors has adopted a policy governing the pre-approval by the audit committee of all services, audit and non-audit, to be provided to our Company by our independent auditors. Under the policy, the audit committee has pre-approved the provision by our independent auditors of specific audit, audit related, tax and other non-audit services as being consistent with auditor independence. Requests or applications to provide services that require the specific pre-approval of the audit committee must be submitted to the audit committee by the independent auditors, and the independent auditors must advise the board of directors as to whether, in the independent auditor’s view, the request or application is consistent with the SEC’s rules on auditor independence.
The audit committee has considered the nature and amount of the fees billed by Turner, Stone & Company, L.L.P. and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining the independence of Turner, Stone & Company, L.L.P.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | The following documents are filed as part of this Report: |
| (1) | Financial Statements |
See Index to Consolidated Financial Statements beginning on Page F-1 of this Report.
| (2) | Financial Statement Schedules |
All financial statement schedules have been omitted since the required information was not applicable or was not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements or the accompanying notes.
| (3) | Exhibits |
The exhibits listed in the following Index to Exhibits are filed, furnished or incorporated by reference as part of this Report.
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† Indicates management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| THE GLIMPSE GROUP, INC. | ||
| September 30, 2024 | ||
| By: | /s/ Lyron Bentovim | |
| Lyron Bentovim | ||
| President and Chief Executive Officer (Principal Executive Officer) | ||
| By: | /s/ Maydan Rothblum | |
| Maydan Rothblum | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date | Name and Title | Signature | ||
| September 30, 2024 | Lyron Bentovim | /s/ Lyron Bentovim | ||
| President, Chief Executive Officer and Chairman of the Board | ||||
| September 30, 2024 | Maydan Rothblum | /s/ Maydan Rothblum | ||
| Chief Financial Officer, Chief Operating Officer and Director | ||||
| September 30, 2024 | Jeff Enslin | /s/ Jeff Enslin | ||
| Director | ||||
| September 30, 2024 | Lemuel Amen | /s/ Lemuel Amen | ||
| Director | ||||
| September 30, 2024 | Alexander Ruckdaeschel | /s/ Alexander Ruckdaeschel | ||
| Director | ||||
| September 30, 2024 | Ian Charles | /s/ Ian Charles | ||
| Director | ||||
| September 30, 2024 | Tamar Elkeles | /s/ Tamar Elkeles | ||
| Director |
| 54 |
THE GLIMPSE GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2024 AND 2023
THE GLIMPSE GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
| Index to Consolidated Financial Statements | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID: |
F-2 |
| Report of Independent Registered Public Accounting Firm (PCAOB
ID: 00 |
F-3 |
| Consolidated Balance Sheets | F-4 |
| Consolidated Statements of Operations | F-5 |
| Consolidated Statements of Stockholders’ Equity | F-6 |
| Consolidated Statements of Cash Flows | F-7 |
| Notes to Consolidated Financial Statements | F-8 - F-32 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of The Glimpse Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidate balance sheet of The Glimpse Group, Inc. and its subsidiaries (the Company) as of June 30, 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended June 30, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024, and the results of its operations and its cash flows for the year ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has recurring losses from operations and negative cash flows from operating activities, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| /s/
| |
| We have served as the Company’s auditor since 2023. | |
| September 30, 2024 | |
| F-2 |
 |
 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of The Glimpse Group, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of The Glimpse Group, Inc. (the “Company”) as of June 30, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the years in the two-year period ended June 30, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred recurring net losses since its inception, expects to generate negative cash flow for the foreseeable future, and expects cash and cash equivalents as of June 30, 2023 may not be sufficient to fund operations for at least the next twelve months, which raises substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2019.
September 28, 2023
| 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 |  |
| F-3 |
THE GLIMPSE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
| As
of June 30, 2024 | As
of June 30, 2023 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deferred costs/contract assets | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accrued non cash performance bonus | ||||||||
| Deferred revenue/contract liabilities | ||||||||
| Lease liabilities, current portion | ||||||||
| Contingent consideration for acquisitions, current portion | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities | ||||||||
| Contingent consideration for acquisitions, net of current portion | ||||||||
| Lease liabilities, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock, par value $ per share,
million shares authorized; shares issued and outstanding | ||||||||
| Common Stock, par value
$ per share, million shares authorized; and issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
THE GLIMPSE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| 2024 | 2023 | |||||||
| For the Years Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | ||||||||
| Software services | $ | $ | ||||||
| Software license/software as a service | ||||||||
| Total Revenue | ||||||||
| Cost of goods sold | ||||||||
| Gross Profit | ||||||||
| Operating expenses: | ||||||||
| Research and development expenses | ||||||||
| General and administrative expenses | ||||||||
| Sales and marketing expenses | ||||||||
| Amortization of acquisition intangible assets | ||||||||
| Goodwill impairment | ||||||||
| Intangible asset impairment | ||||||||
| Change in fair value of acquisition contingent consideration | ( | ) | ( | ) | ||||
| Total operating expenses | ||||||||
| Loss from operations before other income | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Interest income | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share | $ | ) | $ | ) | ||||
| Weighted-average shares used to compute basic and diluted net loss per share | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
THE GLIMPSE GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED JUNE 30, 2024 and 2023
| Shares | Amount | Paid-In Capital | Deficit | Total | ||||||||||||||||
| Common Stock | Additional | Accumulated | ||||||||||||||||||
| Shares | Amount | Paid-In Capital | Deficit | Total | ||||||||||||||||
| Balance as of July 1, 2022 | $ | $ | | $ | ( | ) | $ | |||||||||||||
| Common stock issued for acquisition | ||||||||||||||||||||
| Common stock issued for satisfaction of prior year acquisition liability | ||||||||||||||||||||
| Common stock issued for purchase of intangible asset - technology | ||||||||||||||||||||
| Common stock issued to vendors | ||||||||||||||||||||
| Common stock issued for exercise of options | ||||||||||||||||||||
| Common stock issued for contingent acquisition obligation | ||||||||||||||||||||
| Common stock and stock option based compensation expense | ||||||||||||||||||||
| Stock option-based board of directors expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common stock issued in Securities Purchase Agreement, net | ||||||||||||||||||||
| Common stock issued to vendors | ||||||||||||||||||||
| Common stock issued for exercise of options | ( | ) | ||||||||||||||||||
| Common stock issued to satisfy contingent acquisition obligations | ||||||||||||||||||||
| Common stock and stock option based compensation expense | ||||||||||||||||||||
| Common stock and stock option based board of directors expense | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
THE
GLIMPSE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2024 | 2023 | |||||||
| For the Year Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization and depreciation | ||||||||
| Common stock and stock option based compensation for employees and board of directors | ||||||||
| Accrued non cash performance bonus fair value adjustment | ( | ) | ||||||
| Acquisition contingent consideration fair value adjustment | ( | ) | ( | ) | ||||
| Impairment of intangible assets | ||||||||
| Gain on divestiture of subsidiary | ||||||||
| Reserve on note received in connection with divestiture of subsidiary | ( | ) | ||||||
| Issuance of common stock to vendors | ||||||||
| Adjustment to operating lease right-of-use assets and liabilities | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Deferred costs/contract assets | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Deferred revenue/contract liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flow from investing activities: | ||||||||
| Purchases of equipment | ( | ) | ( | ) | ||||
| Acquisitions, net of cash acquired | ( | ) | ||||||
| Payment of contingent consideration for acquisitions | ( | ) | ( | ) | ||||
| Sale of investments | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows provided by financing activities: | ||||||||
| Proceeds from securities purchase agreement, net | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Cash provided by financing activities | ||||||||
| Net change in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of year | ||||||||
| Cash and cash equivalents, end of year | $ | $ | ||||||
| Non-cash Investing and Financing activities: | ||||||||
| Issuance of common stock for satisfaction of contingent liability | $ | $ | ||||||
| Issuance of common stock for non cash performance bonus | $ | $ | ||||||
| Lease liabilities arising from right-of-use assets | $ | $ | ||||||
| Common stock issued for acquisition | $ | $ | ||||||
| Contingent acquisition consideration liability recorded at closing | $ | $ | ||||||
| Common stock issued for purchase of intangible asset - technology | $ | $ | ||||||
| Issuance of common stock for satisfaction of prior year acquisition liability | $ | $ | ||||||
| Issuance of common stock for satisfaction of contingent liability, net of note extinguishment | $ | $ | ||||||
| Extinguishment of note receivable for satisfaction of contingent liability | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
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 and Turkey. 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. GOING CONCERN
At each reporting period, the Company evaluates whether there are conditions or events that raise doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing expectations for the Company’s cash needs and comparing those needs to the current cash and cash equivalent balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.
The
Company has incurred recurring losses since its inception, including a net loss of approximately $
Outside of potential revenue growth generated by the Company, in order to restore 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.
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.
Potential liquidity resources
Potential
liquidity resources may include the further sale of common stock pursuant to the unused portion of the $
| F-8 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
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, warrants, revenue recognition, allocation of the purchase price of assets relating to business combinations, calculation of contingent consideration for acquisitions, fair value of intangible assets and goodwill impairment.
Cash and Cash Equivalents, Restricted Cash
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.
Restricted
cash represented $
Accounts Receivable
Accounts receivable consists primarily of amounts due from customers under normal trade terms. We recognize accounts receivable at the amount we expect to collect from our customers. We provide an allowance for credit losses to reflect the estimated amount of accounts receivable that may not be collectible.
We determine the allowance for credit losses through a combination of specific identification of troubled accounts, historical loss experience, industry trends, current market conditions, and customer creditworthiness.The allowance for credit losses is adjusted periodically to reflect changes in these factors.
Our accounting policy for credit losses is in accordance with Accounting Standards Codification (ASC) 310, Receivables.
As of June 30, 2024 and 2023 no allowance for doubtful accounts was recorded as all amounts were considered collectible.
Customer Concentration and Credit Risk
Two
customers accounted for approximately
Three
customers accounted for approximately
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.
| F-9 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Business Combinations
The results of a business acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. Acquisition accounting results in assets and liabilities of an acquired business generally being recorded at their estimated fair values as of the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
The Company performs valuations of assets acquired and liabilities assumed and allocates the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired and liabilities assumed may require management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenues, costs and cash flows. Estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is typically one year from the acquisition date, if new information is obtained about facts and circumstances that existed as of the acquisition date, changes in the estimated values of the net assets recorded may change the amount of the purchase price allocated to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statement of operations. At times, the Company engages the assistance of valuation specialists in determining fair values of assets acquired and liabilities assumed in a business combination.
Intangible assets (other than 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;
| F-10 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
● 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 consolidated balance sheets as of June 30, 2024 and 2023. Contingent consideration has been recorded at its fair values using unobservable inputs and have included using the Monte Carlo simulation option pricing framework, incorporating contractual terms and assumptions regarding financial forecasts, discount rates, and volatility of forecasted revenue. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with, at times, the assistance of a third-party valuation specialist.
The Company’s other financial instruments consist primarily of accounts receivable, accounts payable and other liabilities, and approximate fair value due to the short-term nature of these instruments.
Equipment
Equipment,
comprised of computer hardware, is stated at cost less accumulated depreciation. It is depreciated using the straight-line method over
the estimated useful life of the asset, which is primarily
Revenue Recognition
Nature of Revenues
The Company reports its revenues in two categories:
| ● | Software Services: VR, AR and Spatial Computing projects, solutions and consulting services. | |
| ● | Software License and Software-as-a-Service (“SaaS”): VR, AR or Spatial Computing software that is sold either as a license or as a SaaS subscription. |
The Company applies the following steps in order to determine the appropriate amount of revenue to be recognized as it 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. |
| F-11 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer or service is performed and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A portion of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Other contracts can include various services and products which are at times capable of being distinct, and therefore may be accounted for as separate performance obligations.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes and other taxes are excluded from revenues.
For distinct performance obligations recognized at a point in time, any unrecognized portion of revenue and any corresponding unrecognized expenses are presented as deferred revenue/contract liability and deferred costs/contract asset, respectively, in the accompanying consolidated balance sheets. Contract assets include cash and equity based payroll costs, and may include payments to consultants and vendors.
For distinct performance obligations recognized over time, the Company records a contract asset (costs in excess of billings) when revenue is recognized prior to invoicing, or a contract liability (billings in excess of costs) when revenue is recognized subsequent to invoicing.
Significant Judgments
The Company’s contracts with customers may include promises to transfer multiple products/services. Determining whether products/services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Further, judgment may be required to determine the standalone selling price for each distinct performance obligation.
Disaggregation of Revenue
The Company generated revenue for the years ended June 30, 2024 and 2023 by delivering: (i) Software Services, consisting primarily of VR/AR/Spatial Computing software projects, solutions and consulting services, and (ii) Software Licenses & SaaS, consisting primarily of VR, AR and Spatial Computing software licenses or SaaS. The Company currently generates its revenues primarily from customers in the United States.
Revenue for a significant portion of Software Services projects and solutions (projects whereby, the development of the project leads to an identifiable asset with an alternative use to the Company) is recognized at the point of time in which the customer obtains control of the project, customer accepts delivery and confirms completion of the project. Certain other Software Services revenues are custom project solutions (projects whereby, the development of the custom project leads to an identifiable asset with no alternative use to the Company, and, in which, the Company also has an enforceable right to payment under the contract) and are therefore recognized based on the percentage of completion using an input model with a master budget. The budget is reviewed periodically and percentage of completion adjusted accordingly.
Revenue for Software Services consulting services and website maintenance is recognized when the Company performs the services, typically on a monthly retainer basis.
Revenue for Software 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.
| F-12 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Timing of Revenue
The timing of revenue recognition for the years ended June 30, 2024 and 2023 was as follows:
SCHEDULE OF TIMING REVENUE RECOGNITION
| 2024 | 2023 | |||||||
| For theYears Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Products and services transferred at a point in time | $ | $ | ||||||
| Products and services transferred/recognized over time | ||||||||
| Total Revenue | $ | $ | ||||||
Remaining Performance Obligations
Timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally records a receivable/contract asset when revenue is recognized prior to invoicing, or deferred revenue/contract liability when revenue is recognized subsequent to invoicing.
For certain Software Services project contracts the Company invoices customers after the project has been delivered and accepted by the customer. Software Service project contracts typically consist of designing and programming software for the customer. In most cases, there is only one distinct performance obligation, and revenue is recognized upon completion, delivery and customer acceptance. Contracts may include multiple distinct projects that can each be implemented and operated independently of subsequent projects in the contract. In such cases, the Company accounts for these projects as separate distinct performance obligations and recognizes revenue upon the completion of each project or obligation, its delivery and customer acceptance.
For contracts recognized over time, contract liabilities include billings invoiced for software projects for which the contract’s performance obligations are not complete.
For certain other Software Services project contracts, the Company invoices customers for a substantial portion of the project upon entering into the contract due to their custom nature and revenue is recognized based upon percentage of completion. Revenue recognized subsequent to invoicing is recorded as a deferred revenue/contract liability (billings in excess of cost) and revenue recognized prior to invoicing is recorded as a deferred cost/contract asset (cost in excess of billings).
For Software Services consulting or retainer contracts, the Company generally invoices customers monthly at the beginning of each month in advance for services to be performed in the following month. The sole performance obligation is satisfied when the services are performed. Software Services consulting or retainer contracts typically consist of ongoing support for a customer’s software or specified business practices.
For Software License contracts, the Company generally invoices customers when the software has been delivered to and accepted by the customer, which is also when the performance obligation is satisfied. For SaaS contracts, the Company generally invoices customers in advance at the beginning of the service term.
For multi-period Software License contracts, the Company generally invoices customers annually at the beginning of each annual coverage period. Software License contracts consist of providing clients with software designed by the Company. For Software License contracts, there are generally no ongoing support obligations unless specified in the contract (becoming a Software Service).
| F-13 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Unfulfilled
performance obligations represent amounts expected to be earned by the Company on executed contracts. As of June 30, 2024 and 2023, the
Company had approximately $
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.
Foreign Currency
Assets and liabilities recorded in foreign currency are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process, which are deminimis, are recorded in general and administrative expenses on the consolidated statement of operations.
Income Taxes
The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. The Company establishes a valuation allowance if it is more likely than not that the deferred tax assets will not be recovered based on an evaluation of objective verifiable evidence. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit.
The
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income
Taxes, 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. Based on the Company’s
evaluation, it has been concluded that there are uncertain tax positions requiring recognition of $
| F-14 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
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, 2024 and 2023. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method. Dilutive potential common shares include the issuance of potential shares of common stock for outstanding stock options, warrants and convertible debt.
Reclassifications
Certain accounts in the prior period financial statements have been reclassified for comparative purposes to conform with the presentation in the current period financial statements.
Recently Adopted Accounting Pronouncements
In September 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326) which requires measurement and recognition of expected credit losses for financial assets held. The Company adopted this guidance on July 1, 2023 and the impact of the adoption was not material to our consolidated financial statements as credit losses are not expected to be significant based on historical collection trends, the financial condition of payment partners, and external market factors.
In December 2019, the FASB issued ASU No. 2019-12 to simplify the accounting in Accounting Standards Codification (“ASC”) 740, Income Taxes. This standard removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. The Company adopted this guidance on July 1, 2023 using the prospective transition method. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning July 1, 2025. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.
| F-15 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
NOTE 4. BUSINESS ACQUISITION AND ASSET ACQUISTION - TECHNOLOGY
Acquisition – Brightline Interactive, LLC (“BLI”)
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”). BLI is an immersive technology company that provides Spatial Computing, VR and AR based training scenarios and simulations for commercial and government customers. The acquisition significantly expands the Company’s operating and financial scale, introduces new tier 1 customers specifically in the communication, entertainment and government segments, and bolsters the executive management team.
In August 2022, BLI became a wholly-owned subsidiary of Glimpse.
The
aggregate consideration to the Members per the Merger Agreement consisted of: (a) $
The
BLI acquisition’s fair value at Closing was $
The fair value allocation for the purchase price consideration paid at Closing was recorded as follows:
SCHEDULE OF BUSINESS ACQUISITION PURCHASE PRICE CONSIDERATION
| Purchase price consideration: | ||||
| Cash paid to members at Closing | $ | |||
| Company common stock fair value at Closing | ||||
| Fair value of contingent consideration to be achieved | ||||
| Total purchase price | $ | |||
| Fair value allocation of purchase price: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Deferred costs/contract assets | ||||
| Other assets | ||||
| Equipment, net | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Deferred revenue/contract liabilities | ( | ) | ||
| Intangible assets - customer relationships | ||||
| Intangible assets - technology | ||||
| Goodwill | ||||
| Total fair value allocation of purchase price | $ |
The Company’s fair value estimate of the contingent consideration for the BLI acquisition was determined using a Monte Carlo simulation and other methods which account 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.
| F-16 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
The goodwill recognized in connection with the acquisition is primarily attributable to new markets access and will be deductible for tax purposes.
The
results of operations of BLI have been included in the Company’s consolidated financial statements from the date of acquisition.
For the years ended June 30, 2024 and 2023, BLI had revenue of $
Asset Acquisition - Technology
In November 2022, the Company entered into a technology assignment agreement with inciteVR (“IVR”), whereby the Company purchased the entire right, title and interest to certain VR/AR technology, as defined, to expand product offerings.
The
Company issued shares (calculated as defined) of the Company’s common stock, with a fair value (based on the Company’s
common stock price at the close of business on the date of the assignment agreement) of approximately $
Certain IVR owners became employees of Glimpse after the assignment.
NOTE 5. IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS
PulpoAR, LLC (“Pulpo”)
The assets of Pulpo were acquired by the Company in May 2022. Pulpo has not and is not expected to meet any future revenue performance milestones as defined in the asset acquisition agreement. In addition, Pulpo has generated negative cash flows and is expected to continue doing so for the foreseeable future, and its business has become less strategically aligned with the Company’s current focus. As a result, a decision was made by the Company to divest the operations of its wholly owned subsidiary Pulpo.
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 $
On
December 1, 2023 the Company executed an asset purchase agreement whereby the Pulpo assets, as defined, were transferred to a new independent
entity, PulpoAR, Inc., majority owned by the original sellers of Pulpo, in return for a
The
Note is due
| F-17 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
The
Company has fully reserved against the Note and accrued interest as collectability is considered remote and accounts for this investment
at cost ($
For
the years ended June 30, 2024 and 2023, Pulpo had revenue of $
The divestiture did not have a material impact on the Company’s operations or financial results.
BLI
As
part of the BLI acquisition in August 2022, $
Accordingly,
at 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 $
S5D
As part of the Company’s annual review of goodwill impairment, it was determined that unfavorable trends in the S5D business indicated goodwill and long-lived assets of this subsidiary were impaired as of June 30, 2023.
The
Company purchased S5D in February 2022 for the initial fair value consideration of $
Based
on the expectations that the S5D business may not be able to produce positive cash flow for the foreseeable future and there is no expected
market for selling the S5D business, it was determined that S5D’s long-lived assets and goodwill were fully impaired as of June
30, 2023. This determination, based on undiscounted cash flow projections, resulted in an intangible asset impairment expense of $
SCHEDULE OF IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS
| Goodwill | $ | |||
| Intangible asset - customer relationships | ||||
| (net of accumulated amortization) | ||||
| Operating lease - right-of-use asset | ||||
| (net of accumulated amortization) | ||||
| Fixed assets (net of accumulated depreciation) | ||||
| Total S5D intangible asset impairment expense | $ |
| F-18 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
The
S5D business continues to operate. For the years ended June 30, 2024 and 2023, S5D had revenue was $
AUGGD
In
March 2023, primarily due to a lack of market traction, a decision was made by the Company to cease the operations of its wholly owned
subsidiary MotionZone, LLC (dba “AUGGD”) and divest any related assets and potential liabilities. The assets of AUGGD were
originally acquired by the Company in August 2021 for a fair value of $
The
Company accounts for this investment at cost ($
Accordingly,
the net book value of intangible assets, including goodwill, originally recorded at the time of purchase of AUGGD, were written off during
the year ended June 30, 2023. The $
For
the year ended June 30, 2023 (which is the cease of operations of AUGGD), AUGGD had revenue was $
NOTE 6. GOODWILL AND INTANGIBLE ASSETS
The composition of goodwill at June 30, 2024 and 2023 is as follows:
SCHEDULE OF COMPOSITION OF GOODWILL
| XRT | PulpoAR | BLI | Total | |||||||||||||
| Year ended June 30, 2024 | ||||||||||||||||
| XRT | PulpoAR | BLI | Total | |||||||||||||
| Goodwill - beginning of year | $ | $ | $ | $ | ||||||||||||
| Acquisitions | ||||||||||||||||
| Adjustments | ||||||||||||||||
| Impairments | ( | ) | ( | ) | ||||||||||||
| Goodwill - end of year | $ | $ | $ | $ | ||||||||||||
| AUGGD | XRT | S5D | PulpoAR | BLI | Total | |||||||||||||||||||
| Year ended June 30, 2023 | ||||||||||||||||||||||||
| AUGGD | XRT | S5D | PulpoAR | BLI | Total | |||||||||||||||||||
| Goodwill - beginning of year | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Acquisitions | ||||||||||||||||||||||||
| Adjustments | ||||||||||||||||||||||||
| Impairments | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Goodwill - end of year | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| F-19 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Intangible assets, their respective amortization period, and accumulated amortization at June 30, 2024 and 2023 are as follows:
SCHEDULE OF INTANGIBLE ASSETS, AMORTIZATION PERIOD AND ACCUMULATED AMORTIZATION
| XR Terra | Pulpo | BLI | inciteVR | Total | ||||||||||||||||||
| As of June 30, 2024 | ||||||||||||||||||||||
| Value ($) | Amortization Period (Years) | |||||||||||||||||||||
| XR Terra | Pulpo | BLI | inciteVR | Total | ||||||||||||||||||
| Intangible Assets | ||||||||||||||||||||||
| Customer Relationships - beginning of year | $ | $ | $ | $ | $ | |||||||||||||||||
| Customer Relationships - impairment | ( | ) | ( | ) | ||||||||||||||||||
| Customer Relationships - end of year | ||||||||||||||||||||||
| Technology - beginning of year | ||||||||||||||||||||||
| Technology impairment | ( | ) | ( | ) | ||||||||||||||||||
| Technology - end of year | ||||||||||||||||||||||
| Less: Accumulated Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Intangible Assets, net | $ | $ | $ | $ | $ | |||||||||||||||||
| XR Terra | S5D | AUGGD | Pulpo | BLI | inciteVR | Total | ||||||||||||||||||||||||
| As of June 30, 2023 | ||||||||||||||||||||||||||||||
| Value ($) | Amortization Period (Years) | |||||||||||||||||||||||||||||
| XR Terra | S5D | AUGGD | Pulpo | BLI | inciteVR | Total | ||||||||||||||||||||||||
| Intangible Assets | ||||||||||||||||||||||||||||||
| Customer Relationships - beginning of year | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Customer Relationships additions | ||||||||||||||||||||||||||||||
| Customer Relationships impairment | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Customer Relationships - end of year | ||||||||||||||||||||||||||||||
| Technology - beginning of year | ||||||||||||||||||||||||||||||
| Technology additions | ||||||||||||||||||||||||||||||
| Technology impairment | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Technology - end of year | ||||||||||||||||||||||||||||||
| Less: Accumulated Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Intangible Assets, net | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Intangible
asset amortization expense for the years ended June 30, 2024 and 2023 was approximately $
| F-20 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Amortization
attributable to Pulpo was $
Amortization
attributable to BLI customer relationships was $
Amortization
attributable to S5D and AUGGD was $
Estimated intangible asset amortization expense for the remaining lives are as follows:
SCHEDULE OF INTANGIBLE ASSET AMORTIZATION EXPENSE
| Years Ended June 30, | ||||
| 2025 | $ | |||
| 2026 | $ | |||
NOTE 7. FINANCIAL INSTRUMENTS
Cash and Cash Equivalents
The Company’s money market funds are categorized as Level 1 within the fair value hierarchy. As June 30, 2024 and 2023, the Company’s cash and cash equivalents were as follows:
SCHEDULE OF CASH AND CASH EQUIVALENTS AND INVESTMENTS
| As of June 30, 2024 | ||||||||||||||||
| Cost | Unrealized Gain (Loss) | Fair Value | Cash and Cash Equivalents | |||||||||||||
| Cash | $ | $ | $ | |||||||||||||
| Level 1: | ||||||||||||||||
| Money market funds | $ | |||||||||||||||
| Total cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| As of June 30, 2023 | ||||||||||||||||
| Cost | Unrealized Gain (Loss) | Fair Value | Cash and Cash Equivalents | |||||||||||||
| Cash | $ | $ | $ | |||||||||||||
| Level 1: | ||||||||||||||||
| Money market funds | $ | |||||||||||||||
| Total cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| F-21 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Contingent Consideration
As of June 30, 2024 and 2023, 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 30, 2024 using unobservable inputs, primarily internal revenue forecasts. Contingent consideration was valued at the time of acquisitions and at June 30, 2023 using unobservable inputs and have included using the Monte Carlo simulation model. This model incorporates 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, 2024, the Company’s contingent consideration liabilities current and non-current balances were as follows:
SCHEDULE OF FAIR VALUE OF CONTINGENT CONSIDERATION
| Contingent Consideration at Purchase Date | Consideration Paid | Changes in Fair Value | Fair Value | Contingent Consideration | ||||||||||||||||
| As of June 30, 2024 | ||||||||||||||||||||
| Contingent Consideration at Purchase Date | Consideration Paid | Changes in Fair Value | Fair Value | Contingent Consideration | ||||||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, current - S5D | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| Contingent consideration, current - BLI | ||||||||||||||||||||
| Contingent consideration, current - XRT | ( | ) | ||||||||||||||||||
| Total contingent consideration, current portion | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, non-current - S5D | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| Contingent consideration, non-current - BLI | ( | ) | ( | ) | ||||||||||||||||
| Total contingent consideration, net of current portion | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
S5D
has 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 is remote and all earned consideration has been paid. Accordingly,
there is no future contingent consideration recorded related to the S5D acquisition as of June 30, 2024. The range of potential additional
contingent consideration related to S5D in excess of the amounts reflected on the balance sheet at June 30, 2024 is
Revenue
projections for BLI are expected to trigger potential additional gross consideration of $
The
change in fair value of contingent consideration for S5D and BLI for the year ended June 30, 2024 was a non-cash gain of approximately
$
| F-22 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
The
change in fair value of contingent consideration for XR Terra, LLC (“XRT”) for the year ended June 30, 2024 reflects payouts
to the sellers of XRT for consideration recorded as of June 30, 2023. These payouts were made in September 2023 and January 2024 in the
form of Company common stock, fair valued at $
The
range of potential contingent consideration related to the previous divestiture of AUGGD assets at June 30, 2024 is
As of June 30, 2023, the Company’s contingent consideration liabilities current and non-current balances were as follows:
| Contingent Consideration at Purchase Date | Consideration Paid | Changes in Fair Value | Fair Value | Contingent Consideration | ||||||||||||||||
| As of June 30, 2023 | ||||||||||||||||||||
| Contingent Consideration at Purchase Date | Consideration Paid | Changes in Fair Value | Fair Value | Contingent Consideration | ||||||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, current - S5D | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Contingent consideration, current - BLI | ||||||||||||||||||||
| Contingent consideration, current - AUGGD | ( | ) | ||||||||||||||||||
| Contingent consideration, current - XRT | ( | ) | ||||||||||||||||||
| Total contingent consideration, current portion | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, non-current - S5D | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| Contingent consideration, non-current - BLI | ( | ) | ||||||||||||||||||
| Total contingent consideration, net of current portion | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
A
summary of the quantitative significant inputs used to value S5D’s contingent consideration as of June 30, 2023 was: $
A
summary of the quantitative significant inputs used to value BLI’s contingent consideration as of June 30, 2023 was: $
The
change in fair value of contingent consideration for S5D and BLI for the year ended June 30, 2023 was a non-cash gain of approximately
$
| F-23 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
The
change in fair value of contingent consideration also reflects the first anniversary payout to the sellers of S5D based on the achievement
of certain revenue thresholds as defined in the respective purchase agreement. This payout was made in March 2023 in the form of Company
common stock with a fair value of $
As
of June 30, 2023, the Company’s contingent consideration liability related to XR Terra, LLC (“XRT”) is categorized
as Level 3 within the fair value hierarchy as it is based on contractual amounts pursuant to the acquisition agreement, of which certain
inputs are unobservable. The change in fair value of contingent consideration for XRT for the year ended June 30, 2023 was a non-cash
expense of approximately $
The
change in fair value of contingent consideration for AUGGD for the year ended June 30, 2023 reflects the issuance of common stock to
the sellers, net of a note repayment (see Notes 9 and 12). The range of potential additional contingent consideration through December
2024 related to the divestiture of AUGGD assets at June 30, 2023 is
The
range of potential additional contingent consideration through April 2025 related to the PulpoAR acquisition at June 30, 2023 is
NOTE 8. DEFERRED COSTS/CONTRACT ASSETS AND DEFERRED REVENUE/CONTRACT LIABILITIES
At
June 30, 2024 and 2023, deferred costs/contract assets totaling $
| F-24 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
The following table shows the reconciliation of the costs in excess of billings and billings in excess of costs for contracts recognized over time:
SCHEDULE OF RECONCILIATION OF COST IN EXCESS OF BILLING FOR CONTRACT RECOGNIZED OVER TIME
| As of June 30, 2024 | As of June 30, 2023 | |||||||
| Cost incurred on uncompleted contracts | $ | $ | ||||||
| Estimated earnings | ||||||||
| Earned revenue | ||||||||
| Less: billings to date | ||||||||
| Billings in excess of costs, net | $ | $ | ( | ) | ||||
| Balance Sheet Classification | ||||||||
| Contract assets includes, costs and estimated earnings in excess of billings on uncompleted contracts | $ | $ | ||||||
| Contract liabilities includes, billings in excess of costs and estimated earnings on uncompleted contracts | ( | ) | ||||||
| Billings in excess of costs, net | $ | $ | ( | ) | ||||
NOTE 9. EQUITY
Securities Purchase Agreement (“SPA”)
On
September 28, 2023, the Company entered into a SPA with certain institutional investors to sell shares of common stock for
approximately $
The
SPA shares were issued on October 3, 2023. Simultaneously, the exercise price on warrants to purchase
Common Stock Issued
Common stock issued to satisfy Contingent Acquisition Obligations
During
the year ended June 30, 2024, the Company issued approximately shares of common stock, with a fair value of approximately $
During
the year ended June 30, 2023 the Company issued approximately shares of common stock, with a fair value of approximately $
| F-25 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Common stock issued to Employees as Compensation
During the year ended June 30, 2024, the Company issued approximately 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 $ million primarily in sales and marketing expenses on the consolidated statement of operations.
During the year ended June 30, 2023, the Company issued approximately shares of common stock to various employees as compensation and recorded share-based compensation of approximately $ million in general and administrative and sales and marketing expenses on the consolidated statement of operations.
Common stock issued to Board of Directors
During the year ended June 30, 2024, the Company issued approximately shares of common stock to certain board members in return for canceling fully vested stock options, and recorded share-based board compensation of approximately $ million. In addition, the Company issued shares of common stock to certain board members as calendar year 2024 compensation and recorded share-based board compensation of approximately $ million. All board compensation is reported in general and administrative expenses on the consolidated statement of operations
Common stock issued for Exercise of Stock Options
During
the years ended June 30, 2024 and 2023, the Company issued approximately and shares of common stock in cash and cashless
transactions, respectively, upon exercise of the respective option grants and realized cash proceeds of approximately $
Common stock issued to Vendors
During the years ended June 30, 2024 and 2023, the Company issued approximately and shares of common stock, respectively, to various vendors for services performed and recorded share-based compensation of approximately $ million and $ million, respectively, primarily in sales and marketing expenses on the consolidated statement of operations.
Common stock issued for Business Acquisition and Asset Acquisition - Technology
During
the year ended June 30, 2023, the Company issued approximately: shares of common stock, valued at $
Warrants
In connection with the July 2021 IPO and the November 2021 SPA, the Company issued warrants, which are exercisable into Company common shares on a one-for-one basis, as detailed below. warrants have been exercised since issuance. The warrants are not publicly traded.
| F-26 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
SCHEDULE OF WARRANTS OUTSTANDING
| Warrants Outstanding | Exercise Price | Expiration Date | ||||||||
| July 2021 IPO | $ | |||||||||
| November 2021 SPA | $ | |||||||||
| November 2021 SPA | $ | |||||||||
| Total | ||||||||||
Employee Stock-Based Compensation
Stock Option issuance to Executives
In February 2023, pursuant to the Equity Incentive Plan, the Company granted certain executive officers million stock options as a long-term incentive. The options have an exercise price of $ per share. 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 million common shares reserved for issuance. As of June 30, 2024, there were approximately million shares available for issuance under the Plan. The shares available are after the granting of 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.
SCHEDULE OF STOCK OPTION FAIR VALUE ASSUMPTION
| 2024 | 2023 | |||||||
| For
the Years Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Weighted average expected terms (in years) | ||||||||
| Weighted average expected volatility | % | % | ||||||
| Weighted average risk-free interest rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
The weighted average expected term (in years) in the table above excludes the executive Target Options.
| F-27 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
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 employee options in February 2024 and granted approximately new options to employees in March 2024. In addition, this offer was completed for a board member and approximately vested options were cancelled and approximately new options were granted. Also, in February 2024, primarily non-vested options granted to an executive were cancelled and 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, 2024 (including the new grants detailed above) and 2023 (excluding executive Target Options), was approximately $ million and $ million, respectively. Fair value of the executive Target Options granted in 2023 was approximately $ million.
SUMMARY OF STOCK OPTION ACTIVITY
| Weighted Average | ||||||||||||||||
| Remaining | ||||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Price | Term (Yrs) | Value | |||||||||||||
| Outstanding at July 1, 2023 | $ | $ | ||||||||||||||
| Options Granted | ||||||||||||||||
| Options Exercised | ( | ) | ||||||||||||||
| Options Forfeited / Cancelled | ( | ) | ||||||||||||||
| Outstanding at June 30, 2024 | $ | $ | ||||||||||||||
| Exercisable at June 30, 2024 | $ | $ | ||||||||||||||
The above table excludes executive Target Options: granted, $ exercise price, remaining term in years, no intrinsic value. Vesting of these is considered remote.
| Weighted Average | ||||||||||||||||
| Remaining | ||||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Price | Term (Yrs) | Value | |||||||||||||
| Outstanding at July 1, 2022 | $ | $ | ||||||||||||||
| Options Granted | ||||||||||||||||
| Options Exercised | ( | ) | ||||||||||||||
| Options Forfeited / Cancelled | ( | ) | ||||||||||||||
| Outstanding at June 30, 2023 | $ | $ | ||||||||||||||
| Exercisable at June 30, 2023 | $ | $ | ||||||||||||||
The above table excludes executive Target Options: granted, $ exercise price, remaining term in years, no intrinsic value. Vesting of these is considered remote.
The intrinsic value of stock options at June 30, 2024 and 2023 was computed using a fair market value of the common stock of $ per share and $ per share, respectively.
| F-28 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
SCHEDULE OF STOCK OPTION BASED EXPENSE
| 2024 | 2023 | |||||||
| For the Years Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Stock option-based expense : | ||||||||
| Research and development expenses | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Sales and marketing expenses | ||||||||
| Cost of goods sold | ||||||||
| Board option expense | ||||||||
| Total | $ | $ | ||||||
There is no expense included for the executive officers’ Target Options.
At June 30, 2024 total unrecognized compensation expense to employees, board members and vendors related to stock options was approximately $ million (excluding executive Target Options of $ million) and is expected to be recognized over a weighted average period of years (which excludes the executive Target Options).
SCHEDULE OF COMPUTATION OF BASIC AND DILUTED NET LOSS PER SHARE
| 2024 | 2023 | |||||||
| For the Years Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares outstanding for basic and diluted net loss per share | ||||||||
| Basic and diluted net loss per share | $ | ) | $ | ) | ||||
SCHEDULE OF ANTI_DILUTIVE POTENTIALLY DILUTIVE SECURITIES
| At
June 30, 2024 | At
June 30, 2023 | |||||||
| Stock options | ||||||||
| Warrants | ||||||||
| Total | ||||||||
Stock options include executive Target Options at June 30, 2024 and 2023, respectively.
| F-29 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
NOTE 11. PROVISION FOR INCOME TAXES
The components of loss before provision for income taxes for the years ended June 30, 2024 and 2023 were as follows:
SCHEDULE OF LOSS BEFORE PROVISION FOR INCOME TAXES
For the Years ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Loss subject to domestic income taxes | $ | ( | ) | $ | ( | ) | ||
| Loss subject to foreign income taxes | ( | ) | ( | ) | ||||
| Total loss | $ | ( | ) | $ | ( | ) | ||
The Company recorded provision for foreign income taxes for the years ended June 30, 2024 and 2023 consists of the following:
SCHEDULE OF PROVISION FOR FOREIGN INCOME TAXES
For the Years ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Current | $ | $ | ||||||
| Deferred | ( | ) | ||||||
| Total provision for income taxes | $ | $ | ||||||
There
was
The reconciliation of taxes at the U.S. federal statutory rate to our provision for income taxes for the two years ended June 30, 2024 and 2023 were as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION STATUTORY RATE
| For the Years ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Statutory Federal income tax rate | ( | )% | ( | )% | ||||
| State and Local taxes, net of Federal tax benefit | ( | )% | ( | )% | ||||
| Stock based compensation expense (ISO) | % | % | ||||||
| Foreign tax rate differential | ( | )% | ( | )% | ||||
| GAAP to Statutory | % | ( | )% | |||||
| Change in valuation allowance | % | % | ||||||
| Income Taxes Provision | % | % | ||||||
The Company had deferred tax assets as of June 30, 2024 and 2023 as follows:
SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS
| As of | As of | |||||||
| June 30, 2024 | June 30, 2023 | |||||||
| Net-operating loss carryforward | $ | $ | ||||||
| Goodwill and intangible asset impairment | ||||||||
| Stock based compensation | ||||||||
| Other | ||||||||
| Total Deferred Tax Assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred Tax Asset, Net | $ | $ | ||||||
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. At June 30, 2024, the Company had aggregate net operating loss carryforwards (“NOLs”)
of approximately $
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 at June 30, 2024 and June 30, 2023.
The
Company’s valuation allowance during the years ended June 30, 2024 and 2023 increased by approximately $
| F-30 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Upon completion of its 2023 (for fiscal year ending June 30, 2024) 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, 2024 and 2023:
SCHEDULE OF UNRECOGNIZED TAX BENEFITS
| 2024 | 2023 | |||||||
For the Years ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Unrecognized tax benefit -beginning of year | $ | $ | ||||||
| Gross increases – prior year tax positions | ||||||||
| Gross decreases – prior year tax positions | ||||||||
| Gross increases – current year tax positions | ||||||||
| Gross decreases – current year tax positions | ||||||||
| Statute lapse | ||||||||
| Unrecognized tax benefit – end of year | $ | $ | ||||||
At
June 30, 2024 and 2023, the total amount of unrecognized tax benefits of $
No interest and penalties were incurred or accrued for the years ended June 30, 2024 and 2023.
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 12. RELATED PARTY TRANSACTIONS
Augmented Reality Investments Pty Ltd (“ARI”)
In
March 2022, the Company lent to ARI, the entity from which the assets of AUGGD (see Notes 5) were bought, $
The
note bore interest at the rate of
The note and any accrued interest were extinguished in July 2022 (see Note 9).
NOTE 13. COMMITMENTS AND CONTINGENCIES
Lease Costs
The
Company made cash payments for all operating leases for the years ended June 30, 2024 and 2023, of approximately $
The
total rent expense for all operating leases for the years ended June 30, 2024 and 2023, was approximately $
Lease Commitments
The Company has various operating leases for its offices. These existing leases have remaining lease terms ranging from approximately 1 to 3 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 reasonably certain to renew.
| F-31 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
Future approximate undiscounted lease payments for the Company’s operating lease liabilities and a reconciliation of these payments to its operating lease liabilities at June 30, 2024 are as follows:
SCHEDULE OF UNDISCOUNTED LEASE PAYMENTS
| Years Ended June 30, | ||||
| 2025 | $ | |||
| 2026 | ||||
| Total future minimum lease commitments, including short-term leases | ||||
| Less: future minimum lease payments of short -term leases | ( | ) | ||
| Less: imputed interest | ( | ) | ||
| Present value of future minimum lease payments, excluding short term leases | $ | |||
| Current portion of operating lease liabilities | $ | |||
| Non-current portion of operating lease liabilities | ||||
| Total operating lease liability | $ | |||
Contingent Consideration for Acquisitions
Contingent consideration for acquisitions, consists of the following as of June 30, 2024 and, 2023 respectively (see Note 6):
SCHEDULE OF CONTINGENT CONSIDERATION FOR ACQUISITIONS
| As of June 30, | As of June 30, | |||||||
| 2024 | 2023 | |||||||
| S5D, current portion | $ | $ | ||||||
| BLI, current portion | ||||||||
| XRT | ||||||||
| Subtotal current portion | ||||||||
| S5D, net of current portion | ||||||||
| BLI, net of current portion | ||||||||
| Total contingent consideration for acquisitions | $ | $ | ||||||
Employee Bonus
During
this fiscal year, a certain employee met the revenue threshold to earn a bonus payout and this was included in accrued non cash
performance bonus in the consolidated balance sheet at June 30, 2023. This bonus was paid in February 2024 entirely in the form of
Company common stock with a fair value of approximately $
Potential Future Distributions Upon Divestiture or Sale
In some instances, upon a divestiture or sale of a subsidiary company or capital raise into subsidiary company, the Company is contractually obligated to distribute a portion of the net proceeds or capital raise to the senior management team of the divested subsidiary company.
NOTE 14. SUBSEQUENT EVENTS
On September 3, 2024, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $ for the prior 30 consecutive business days, the Company no longer meets the minimum bid price requirement for continued listing on the Nasdaq Capital Market. In accordance with Nasdaq Marketplace rules, the Company has a period of 180 calendar days from September 3, 2024, or until March 3, 2025, to regain compliance with the Minimum Bid Price Requirement. If at any time before March 3, 2025, the bid price of the Company’s common stock closes at or above $ per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement.
The Company’s receipt of the notification letter has no immediate effect on the listing of the Company’s shares, which will continue to trade uninterrupted on Nasdaq under the ticker “VRAR”. In addition, it does not affect the Company’s business, operations or reporting requirements with the Securities and Exchange Commission. In order to regain compliance with the Minimum Bid Price Requirements, the Company and its Board of Directors are reviewing various potential measures. The Company is not considering a reverse stock split at this time.
| F-32 |
Exhibit 4.1
DESCRIPTION OF REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
The following description of the capital stock of The Glimpse Group, Inc. (the “Company,” “we,” “us” or “our”) is a summary and does not purport to be complete. It is subject to, and qualified in its entirety by reference to, our Articles of Incorporation and our Amended and Restated Bylaws (“Bylaws”), each of which has been filed with the Securities and Exchange Commission. This description also summarizes relevant provisions of Nevada law. We encourage you to read our Articles of Incorporation, our Bylaws and the applicable provisions of Nevada law for additional information.
General
Our Articles of Incorporation authorizes us to issue 320,000,000 shares of capital stock, consisting of 300,000,000 shares of common stock, par value $0.001 per share (“common stock”), and 20,000,000 shares of preferred stock, par value $0.001 per share (“preferred stock”).
Our board of directors is authorized at any time, and from time to time, to provide for the issuance of shares of preferred stock in one or more series, and to determine the designations, preferences, limitations and relative or other rights of the preferred stock or any series thereof. For each series, our board of directors shall determine, by resolution or resolutions adopted prior to the issuance of any shares thereof, the designations, preferences, limitations and relative or other rights thereof. Our board of directors shall have the authority to determine the number of shares that will comprise each series. Prior to the issuance of any shares of a series, but after adoption by our board of directors of the resolution establishing such series, the appropriate officers of the Company shall file such documents with the State of Nevada as may be required by law. The issuance of preferred stock could have an adverse impact on the market price of our common stock.
Common Stock
Dividend Rights
The holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available at the times and in the amounts that our board of directors may determine.
Voting Rights
Each holder of our common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Our Articles of Incorporation provide that there is no cumulative voting for directors permitted.
Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions.
Liquidation Rights
Upon our liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock outstanding at that time after payment of other claims of creditors.
Anti-takeover Provisions
Certain provisions of our Articles of Incorporation, our Bylaws and Nevada law may have the effect of delaying, deferring or discouraging another person from acquiring control of our Company, even if the acquisition arguably could benefit our stockholders.
Anti-Takeover Provisions of Nevada State Law
Nevada’s “combinations with interested stockholders” statutes, Nevada Revised Statues (“NRS”) 78.411 through 78.444, inclusive, prohibit specified types of business “combinations” between certain Nevada corporations and any person deemed to be an “interested stockholder” for two years after such person first becomes an “interested stockholder” unless the corporation’s board of directors approves the combination, or the transaction by which such person becomes an “interested stockholder”, in advance, or unless the combination is approved by the board of directors and sixty percent of the corporation’s voting power not beneficially owned by the interested stockholder, its affiliates and associates. Further, in the absence of prior approval certain restrictions may apply even after such two-year period. However, these statutes do not apply to any combination of a corporation and an interested stockholder after the expiration of four years after the person first became an interested stockholder. For purposes of these statutes, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “combination” is sufficiently broad to cover most significant transactions between a corporation and an “interested stockholder.” These statutes generally apply to Nevada corporations with 200 or more stockholders of record. However, a Nevada corporation may elect in its articles of incorporation not to be governed by these particular laws, but if such election is not made in the corporation’s original articles of incorporation, the amendment (i) must be approved by the affirmative vote of the holders of stock representing a majority of the outstanding voting power of the corporation not beneficially owned by interested stockholders or their affiliates and associates, and (ii) is not effective until 18 months after the vote approving the amendment and does not apply to any combination with a person who first became an interested stockholder on or before the effective date of the amendment. We have not made such an election in our original articles of incorporation.
Nevada’s “acquisition of controlling interest” statutes, NRS 78.378 through 78.379, inclusive, contain provisions governing the acquisition of a controlling interest in certain Nevada corporations. These “control share” laws provide generally that any person that acquires a “controlling interest” in certain Nevada corporations may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights. Absent such provision in our Bylaws, these laws would apply to us as of a particular date if we were to have 200 or more stockholders of record (at least 100 of whom have addresses in Nevada appearing on our stock ledger at all times during the 90 days immediately preceding that date) and do business in the State of Nevada directly or through an affiliated corporation, unless our Articles of Incorporation or Bylaws in effect on the tenth day after the acquisition of a controlling interest provide otherwise. These laws provide that a person acquires a “controlling interest” whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the NRS, would enable that person to exercise (i) one fifth or more, but less than one third, (ii) one third or more, but less than a majority or (iii) a majority or more, of all of the voting power of the corporation in the election of directors. Once an acquirer crosses one of these thresholds, shares which it acquired in the transaction taking it over the threshold and within the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interest become “control shares” to which the voting restrictions described above apply.
Nevada law also provides that directors may resist a change or potential change in control if the directors determine that the change is opposed to, or not in the best interests of, the corporation. The existence of the foregoing provisions and other potential anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of us, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
Anti-Takeover Effects of our Articles of Incorporation and Bylaws
The following provisions of our Articles of Incorporation and Bylaws could have the effect of delaying or discouraging another party from acquiring control of us and could encourage persons seeking to acquire control of us to first negotiate with our board of directors:
| ● | No cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; | |
| ● | The exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director; | |
| ● | The fact that our directors may be removed only by the affirmative vote or consent of the holders of not less than two-thirds of the voting power (unless such removal is for cause) of our outstanding shares of capital stock entitled to vote generally in the election of directors (considered for this purpose as one class); and | |
| ● | The ability of our board of directors to alter our Bylaws without obtaining stockholder approval (subject to the concurrent power of our stockholders to adopt, alter, amend or repeal our Bylaws). |
Forum Selection and Jurisdiction
Our Bylaws provide that unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) an action asserting a claim arising pursuant to any provision of the NRS, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located within the state of Nevada, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. Actions arising under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, shall not be governed by the foregoing provision.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes, which may discourage such lawsuits.
Exhibit 19.1
The Glimpse Group, Inc. Policy on Insider Trading.
This Insider Trading Policy (the “Policy”) describes the standards of The Glimpse Group, Inc. and its subsidiaries (the “Company”) on trading, and causing the trading of, the Company’s securities or securities of certain other publicly traded companies while in possession of confidential information.
“This Policy is divided into two parts: the first part prohibits trading in certain circumstances and applies to all directors, officers and employees, and their respective immediate family members, of the Company and the second part imposes special additional trading restrictions and applies to all (i) directors of the Company, (ii) executive officers of the Company, (iii) any employee holding the title “chief technology officer”, “chief creative officer”, “chief marketing officer”, “chief revenue officer”, “chief information officer”, “director,” or “vice president” of the Company, or anyone holding the title of “general manager” in any of the Company’s subsidiaries, (iv) any employee in the Company’s finance department, and (v) any other individual designated from time to time by the board of directors of the Company or the Compliance Officer as an individual that requires the imposition of special trading restrictions (collectively, “Covered Persons”).
One of the principal purposes of the federal securities laws is to prohibit so-called “insider trading.” Simply stated, insider trading occurs when a person uses material nonpublic information obtained through involvement with the Company to make decisions to purchase, sell, give away or otherwise trade the Company’s securities or to provide that information to others outside the Company.
The prohibitions against insider trading apply to trades, tips and recommendations by virtually any person, including all persons associated with the Company, if the information involved is “material” and “nonpublic.” These terms are defined in this Policy under Part I, Section 3 below. The prohibitions would apply to any director, officer or employee who buys or sells Company stock on the basis of material nonpublic information that he or she obtained about the Company, its customers, suppliers, or other companies with which the Company has contractual relationships or may be negotiating transactions.
PART I
1. Applicability: This Policy applies to all trading or other transactions in the Company’s securities, including common stock, options and any other securities that the Company may issue, such as preferred stock, notes, bonds and convertible securities, as well as to derivative securities relating to any of the Company’s securities, whether or not issued by the Company. This Policy applies to all employees of the Company, all officers of the Company and all members of the Company’s board of directors and their respective family members.
2. General Policy: No Trading or Causing Trading While in Possession of Material Nonpublic Information
(a) No director, officer or employee or any of their immediate family members may purchase or sell, or offer to purchase or sell, any Company security, whether or not issued by the Company, while in possession of material nonpublic information about the Company. (The terms “material” and “nonpublic” are defined in Part I, Section 3(a) and (b) below.)
(b) No director, officer or employee or any of their immediate family members who knows of any material nonpublic information about the Company may communicate that information to (“tip”) any other person, including family members and friends, or otherwise disclose such information without the Company’s authorization.
(c) No director, officer or employee or any of their immediate family members may purchase or sell any security of any other company, whether or not issued by the Company, while in possession of material nonpublic information about that company that was obtained in the course of his or her involvement with the Company. No director, officer or employee or any of their immediate family members who knows of any such material nonpublic information may communicate that information to, or tip, any other person, including family members and friends, or otherwise disclose such information without the Company’s authorization.
(d) For compliance purposes, you should never trade, tip or recommend securities (or otherwise cause the purchase or sale of securities) while in possession of information that you have reason to believe is material and nonpublic unless you first consult with, and obtain the advance approval of, the Compliance Officer (which is defined in Part I, Section 3(c) below).
(e) Covered Persons must “pre-clear” all trading in securities of the Company in accordance with the procedures set forth in Part II, Section 3 below.
3. Definitions:
(a) Material. Insider trading restrictions come into play only if the information you possess is “material.” Materiality, however, involves a relatively low threshold. Information is generally regarded as “material” if it has market significance, that is, if its public dissemination is likely to affect the market price of securities, or if it otherwise is information that a reasonable investor would want to know before making an investment decision.
Information dealing with the following subjects is reasonably likely to be found material in particular situations:
| (i) | significant changes in the Company’s prospects; | |
| (ii) | significant write-downs in assets or increases in reserves; | |
| (iii) | developments regarding significant litigation or government agency investigations; | |
| (iv) | liquidity problems; | |
| (v) | changes in earnings estimates or unusual gains or losses in major operations; | |
| (vi) | major changes in management; | |
| (vii) | changes in dividends; | |
| (viii) | extraordinary borrowings; | |
| (ix) | award or loss of a significant contract | |
| (x) | changes in debt ratings; | |
| (xi) | proposals, plans or agreements, even if preliminary in nature, involving mergers, acquisitions, divestitures, recapitalizations, strategic alliances, licensing arrangements, or purchases or sales of substantial assets; | |
| (xii) | offerings of Company securities; and | |
| (xiii) | pending statistical reports (such as, consumer price index, money supply and retail figures, or interest rate developments). |
Material information is not limited to historical facts but may also include projections and forecasts. With respect to a future event, such as a merger, acquisition or introduction of a new product, the point at which negotiations or product development are determined to be material is determined by balancing the probability that the event will occur against the magnitude of the effect the event would have on a company’s operations or stock price should it occur. Thus, information concerning an event that would have a large effect on stock price, such as a merger, may be material even if the possibility that the event will occur is relatively small. When in doubt about whether particular nonpublic information is material, you should presume it is material. If you are unsure whether information is material, you should either consult the Compliance Officer before making any decision to disclose such information (other than to persons who need to know it) or to trade in or recommend securities to which that information relates or assume that the information is material.
(b) Nonpublic. Insider trading prohibitions come into play only when you possess information that is material and “nonpublic.” The fact that information has been disclosed to a few members of the public does not make it public for insider trading purposes. To be “public” the information must have been disseminated in a manner designed to reach investors generally, and the investors must be given the opportunity to absorb the information. Even after public disclosure of information about the Company, you must wait until the close of business on the second trading day after the information was publicly disclosed before you can treat the information as public.
Nonpublic information may include:
| (i) | information available to a select group of analysts or brokers or institutional investors; | |
| (ii) | undisclosed facts that are the subject of rumors, even if the rumors are widely circulated; and | |
| (iii) | information that has been entrusted to the Company on a confidential basis until a public announcement of the information has been made and enough time has elapsed for the market to respond to a public announcement of the information (normally two trading days). As with questions of materiality, if you are not sure whether information is considered public, you should either consult with the Compliance Officer or assume that the information is nonpublic and treat it as confidential. |
(c) Compliance Officer. The Company has appointed the Chief Financial Officer as the Compliance Officer for this Policy. The duties of the Compliance Officer include, but are not limited to, the following:
| (i) | assisting with implementation and enforcement of this Policy; | |
| (ii) | circulating this Policy to all employees and ensuring that this Policy is amended as necessary to remain up-to-date with insider trading laws; | |
| (iii) | pre-clearing all trading in securities of the Company by Covered Persons in accordance with the procedures set forth in Part II, Section 3 below; | |
| (iv) | providing approval of any Rule 10b5-1 plans under Part II, Section 1(c) below and any prohibited transactions under Part II, Section 4 below; and | |
| (v) | providing a reporting system with an effective whistleblower protection mechanism. |
4. Violations of Insider Trading Laws: Penalties for trading on or communicating material nonpublic information can be severe, both for individuals involved in such unlawful conduct and their employers and supervisors, and may include jail terms, criminal fines, civil penalties and civil enforcement injunctions. Given the severity of the potential penalties, compliance with this Policy is absolutely mandatory.
(a) Legal Penalties. A person who violates insider trading laws by engaging in transactions in a company’s securities when he or she has material nonpublic information can be sentenced to a substantial jail term and required to pay a criminal penalty of several times the amount of profits gained or losses avoided. In addition, a person who tips others may also be liable for transactions by the tippees to whom he or she has disclosed material nonpublic information. Tippers can be subject to the same penalties and sanctions as the tippees, and the SEC has imposed large penalties even when the tipper did not profit from the transaction. The SEC can also seek substantial civil penalties from any person who, at the time of an insider trading violation, “directly or indirectly controlled the person who committed such violation,” which would apply to the Company and/or management and supervisory personnel. These control persons may be held liable for up to the greater of $1 million or three times the amount of the profits gained or losses avoided. Even for violations that result in a small or no profit, the SEC can seek penalties from a company and/or its management and supervisory personnel as control persons.
(b) Company-imposed Penalties. Employees who violate this Policy may be subject to disciplinary action by the Company, including dismissal for cause. Any exceptions to the Policy, if permitted, may only be granted by the Compliance Officer and must be provided before any activity contrary to the above requirements takes place.
5. Inquiries: If you have any questions regarding any of the provisions of this Policy, please contact the Compliance Officer, who shall be the Chief Executive Officer of the Company unless otherwise designated by the Company’s board of directors.
PART II
1. Blackout Periods: All Covered Persons are prohibited from trading in the Company’s securities during blackout periods as defined below.
(a) Quarterly Blackout Periods. Trading in the Company’s securities is prohibited during the period beginning at the close of the market on the first trading day of each fiscal quarter and ending at the close of business on the second trading day following the date the Company’s financial results are publicly disclosed and Form 10-Q or Form 10-K is filed. During these periods, Covered Persons generally possess or are presumed to possess material nonpublic information about the Company’s financial results.
(b) Other Blackout Periods. From time to time, other types of material nonpublic information regarding the Company (such as negotiation of mergers, acquisitions or dispositions or new product developments) may be pending and not be publicly disclosed. While such material nonpublic information is pending, the Company may impose special blackout periods during which Covered Persons are prohibited from trading in the Company’s securities. If the Company imposes a special blackout period, it will notify the Covered Persons affected.
(c) Exception. These trading restrictions do not apply to transactions under a pre-existing written plan, contract, instruction, or arrangement under Rule 10b5-1 under the Securities Exchange Act of 1934 (an “Approved 10b5-1 Plan”) that:
| (i) | has been reviewed and approved at least one month in advance of any trades thereunder by the Compliance Officer (or, if revised or amended, such revisions or amendments have been reviewed and approved by the Compliance Officer at least one month in advance of any subsequent trades); | |
| (ii) | was entered into in good faith by the Covered Person at a time when the Covered Person was not in possession of material nonpublic information about the Company; and | |
| (iii) | gives a third party the discretionary authority to execute such purchases and sales, outside the control of the Covered Person, so long as such third party does not possess any material nonpublic information about the Company; or explicitly specifies the security or securities to be purchased or sold, the number of shares, the prices and/or dates of transactions, or other formula(s) describing such transactions. |
2. Trading Window. Covered Persons are permitted to trade in the Company’s securities when no blackout period is in effect. Generally this means that Covered Persons can trade during the period beginning on the close of business on the second trading day following the date the Company’s financial results are publicly disclosed and Form 10-Q or Form 10-K is filed and ending on the first trading day of the next fiscal quarter. However, even during this trading window, a Covered Person who is in possession of any material nonpublic information should not trade in the Company’s securities until the information has been made publicly available or is no longer material. In addition, the Company may close this trading window if a special blackout period under Part II, Section 1(b) above is imposed and will re-open the trading window once the special blackout period has ended.
3. Pre-clearance of Securities Transactions:
(a) Because Covered Persons are likely to obtain material nonpublic information on a regular basis, the Company requires all such persons to refrain from trading, even during a trading window under Part II, Section 2 above, without first pre-clearing all transactions in the Company’s securities.
(b) Subject to the exemption in subsection (d) below, no Covered Person may, directly or indirectly, purchase or sell (or otherwise make any transfer, gift, pledge or loan of) any Company security at any time without first obtaining prior approval from the Compliance Officer. These procedures also apply to transactions by such person’s spouse, other persons living in such person’s household and minor children and to transactions by entities over which such person exercises control.
(c) The Compliance Officer shall record the date each request is received and the date and time each request is approved or disapproved. Unless revoked, a grant of permission will normally remain valid until the close of trading two business days following the day on which it was granted. If the transaction does not occur during the two-day period, pre-clearance of the transaction must be re-requested.
(d) Pre-clearance is not required for purchases and sales of securities under an Approved 10b5-1 Plan. With respect to any purchase or sale under an Approved 10b5-1 Plan, the third party effecting transactions on behalf of the Covered Person should be instructed to send duplicate confirmations of all such transactions to the Compliance Officer.
4. Prohibited Transactions:
(a) Directors and executive officers of the Company are prohibited from trading in the Company’s equity securities during a blackout period imposed under an “individual account” retirement or pension plan of the Company, during which at least 50% of the plan participants are unable to purchase, sell or otherwise acquire or transfer an interest in equity securities of the Company, due to a temporary suspension of trading by the Company or the plan fiduciary.
(b) Covered Persons, including any person’s spouse, other persons living in such person’s household and minor children and entities over which such person exercises control, are prohibited from engaging in the following transactions in the Company’s securities unless advance approval is obtained from the Compliance Officer:
| (i) | Short-term trading. Covered Persons who purchase Company securities may not sell any Company securities of the same class for at least six months after the purchase; | |
| (ii) | Short sales. Covered Persons may not sell the Company’s securities short; | |
| (iii) | Options trading. Covered Persons may not buy or sell puts or calls or other derivative securities on the Company’s securities; | |
| (iv) | Trading on margin or pledging. Covered Persons may not hold Company securities in a margin account or pledge Company securities as collateral for a loan; and | |
| (v) | Hedging. Covered Persons may not enter into hedging or monetization transactions or similar arrangements with respect to Company securities. |
5. Acknowledgment and Certification: All Covered Persons are required to sign the attached acknowledgment and certification.
ACKNOWLEDGMENT AND CERTIFICATION
The undersigned does hereby acknowledge receipt of the Company’s Insider Trading Policy. The undersigned has read and understands (or has had explained) such Policy and agrees to be governed by such Policy at all times in connection with the purchase and sale of securities and the confidentiality of nonpublic information.
| (Signature) | |
| (Please print name) | |
| Date: _________________________ |
Exhibit 21.1
Subsidiaries of the Registrant
| Name of Subsidiary | Incorporation State/Country | |
| Glimpse Learning, LLC | Nevada | |
| Brightline Interactive, LLC | Nevada | |
| Foretell Studios, LLC (dba Foretell Reality) | Nevada | |
| Glimpse Group Yazilim ve ARGE Ticaret Anonim Sirketi (Glimpse Turkey) | Turkey | |
| QReal, LLC | Nevada | |
| Sector 5 Digital, LLC | Nevada | |
| XR Terra, LLC | Nevada |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the inclusion of our report dated September 28, 2023 with respect to the consolidated balance sheet of The Glimpse Group, Inc. (the “Company”) as of June 30, 2023 and the related consolidated statement of operations, consolidated statement of stockholders’ equity (deficit), and consolidated statement of cash flows for the year then ended, which appears in this Annual Report on Form 10-K of the Company for the year ended June 30, 2024. Our report includes an explanatory paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going concern.
/s/ Hoberman & Lesser CPA’s, LLP
New York, NY
September 30, 2024
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Lyron Bentovim, Chief Executive Officer of The Glimpse Group, Inc., certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of The Glimpse Group, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared. | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: September 30, 2024 | /s/ Lyron Bentovim |
| Lyron Bentovim | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Maydan Rothblum, Chief Financial Officer of The Glimpse Group, Inc., certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of The Glimpse Group, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared. | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: September 30, 2024 | /s/ Maydan Rothblum |
| Maydan Rothblum | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Glimpse Group, Inc. (“Company”) on Form 10-K for the fiscal year ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the knowledge of each of the undersigned:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 30, 2024
| /s/ Lyron Bentovim | |
| Lyron Bentovim | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| /s/ Maydan Rothblum | |
| Maydan Rothblum | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 97.1
GLIMPSE GROUP, INC. (the “Company”) CLAWBACK POLICY
Introduction
The Board of Directors of the Company (the “Board”), believes that it is in the best interests of the Company and its shareholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. The Board has therefore adopted this policy which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws (the “Policy”). This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934 (the “Exchange Act”).
Administration
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee, in which case references herein to the Board shall be deemed references to the Compensation Committee. Any determinations made by the Board shall be final and binding on all affected individuals.
Covered Executives
This Policy applies to the Company’s current and former executive officers, as determined by the Board in accordance with Section 10D of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are listed, and such other executives or employees who may from time to time be deemed subject to the Policy by the Board (“Covered Executives”).
Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, the Board will require reimbursement or forfeiture of any excess Incentive Compensation received by any Covered Executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement.
Incentive Compensation
For purposes of this Policy, Incentive Compensation means any of the following; provided that, such compensation is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure:
| ● | Annual bonuses and other short- and long-term cash incentives. | |
| ● | Stock options/ equity incentive grants. | |
| ● | Stock appreciation rights. | |
| ● | Restricted stock. | |
| ● | Restricted stock units. | |
| ● | Performance shares. | |
| ● | Performance units. |
Financial reporting measures may include:
| ● | Company stock price. | |
| ● | Total shareholder return. | |
| ● | Revenues. | |
| ● | Net income. | |
| ● | Earnings before interest, taxes, depreciation, and amortization (EBITDA). | |
| ● | Funds from operations. | |
| ● | Liquidity measures such as working capital or operating cash flow. | |
| ● | Return measures such as return on invested capital or return on assets. | |
| ● | Earnings measures such as earnings per share. |
Excess Incentive Compensation: Amount Subject to Recovery
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Board.
If the Board cannot determine the amount of excess Incentive Compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement.
Method of Recoupment
The Board will, in its sole discretion, determine the method for recouping Incentive Compensation from the Covered Executives which may include, without limitation:
(a) requiring reimbursement of cash Incentive Compensation previously paid;
(b) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;
(c) offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive;
(d) cancelling outstanding vested or unvested equity awards; and/or
(e) taking any other remedial and recovery action permitted by law, as determined by the Board.
No Indemnification
The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive Compensation.
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Interpretation
The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act and any applicable rules or standards adopted by the Securities and Exchange Commission or any national securities exchange on which the Company’s securities are listed.
Effective Date
This Policy shall be effective as of the date it is adopted by the Board (the “Effective Date”) and shall apply to Incentive Compensation that is approved, awarded or granted to Covered Executives on or after October 2, 2023.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect final regulations adopted by the Securities and Exchange Commission under Section 10D of the Exchange Act and to comply with any rules or standards adopted by a national securities exchange on which the Company’s securities are listed. The Board may terminate this Policy at any time, provided such termination is in compliance with the law.
Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
Impracticability
The Board shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be impracticable, as determined by the Board in accordance with Rule 10D- 1 of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are listed.
Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.
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